Economic Decision Making
This exists because people have unlimited wants but limited resources.
Answer: What is scarcity?
A reward or punishment that encourages people to behave in a particular way.
Answer: What is an incentive?
An increase in an economy's ability to produce goods and services over time.
Answer: What is long-run economic growth?
The rules, laws, organizations, and systems that shape how people interact economically.
Answer: What are institutions?
According to this law, when price rises, quantity demanded generally falls, holding other factors constant.
Answer: What is the law of demand?
The value of the next-best alternative you give up when making a choice.
Answer: What is opportunity cost?
When a store offers a discount on a product and customers buy more of it, this demonstrates how incentives can do this.
Answer: What is change behavior?
The amount of goods and services produced for each unit of input, such as labor.
Answer: What is productivity?
These give people legal ownership and control over resources such as land, businesses, and property.
Answer: What are property rights?
According to this law, when price rises, quantity supplied generally rises, holding other factors constant.
Answer: What is the law of supply?
This describes all the options you give up when making a choice, while opportunity cost identifies the single next-best alternative.
Answer: What is the difference between a trade-off and opportunity cost?
A consequence of a decision that was not intended by the person or group making the decision.
Answer: What is an unintended consequence?
The knowledge, skills, education, and experience that workers possess.
Answer: What is human capital?
Strong property rights encourage people to invest because they know the law will generally protect this.
Answer: What is ownership of their property?
The price and quantity at which the quantity demanded equals the quantity supplied.
Answer: What is equilibrium?
This type of analysis compares the additional benefits of an action with its additional costs.
Answer: What is marginal analysis?
A government raises taxes on cigarettes to discourage smoking. The tax is designed to create this type of incentive.
Answer: What is a negative incentive/disincentive?
Tools, machines, buildings, and equipment used to produce goods and services.
Answer: What is physical capital?
These legally enforceable agreements allow buyers and sellers to establish clear expectations about a transaction.
Answer: What are laws and regulations
This occurs when quantity demanded is greater than quantity supplied at a given price.
Answer: What is a shortage?
A student decides to study for one more hour because the expected benefit of a higher grade is greater than the cost of giving up that hour of free time. This is an example of this concept.
Answer: What is marginal analysis?
A policy is designed to solve one problem but creates a different problem that policymakers did not expect. Economists would describe the unexpected result as this.
Answer: What is an unintended consequence?
New inventions and improved methods of production can increase this, allowing workers to produce more with the same resources.
Answer: What is productivity?
Markets rely on these because buyers and sellers need confidence that agreements will be honored and disputes can be resolved.
Answer: What is rule of law & stable government
This occurs when quantity supplied is greater than quantity demanded at a given price.
Answer: What is a surplus?