Ten Principles of Economics
The limited nature of society’s resources.
What is scarcity?
A visual model of the economy that shows how dollars flow through markets among households and firms.
What is the circular flow diagram?
The ability to produce a good using fewer inputs than another producer does.
What is absolute advantage?
A market in which there are so many buyers and so many sellers that each has a negligible impact on the market price.
What is a competitive market?
The study of how society manages its scarce resources.
What is econonomics?
A graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology.
What is the production possibilities frontier?
The ability to produce a good at a lower opportunity cost than another producer.
What is comparative advantage?
The amount of a good that buyers are willing and able to purchase.
What is quantity demanded?
Whatever must be given up in order to obtain some item.
What is opportunity cost?
When the economy is producing less than it can from the resources it has available.
What is inefficient?
Goods produced abroad and sold domestically.
What are imports?
The claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.
What is the law of demand?
The quantity of goods and services produced by each unit of labor input.
What is productivity?
They are sellers in the market for factors of production.
What are households?
For both parties to gain from trade, the price at which they trade must lie between these costs.
What are opportunity costs?
A good for which, other things equal, an increase in income leads to a decrease in demand.
What is an inferior good?
It can make everyone better off.
What is trade?
They are buyers in the market for factors of production.
What are firms?
They distort price signals and misallocate resources in an economy.
What are tariffs?
A situation in which quantity supplied is greater than quantity demanded.
What is a surplus?