MICROECONOMICS Key Concepts
Opportunity cost - answerswhatever must be given up to obtain some item
Explicit cost - answers...
Duplicit cost - answers...
Rational people - answersPeople who systematically and purposefully do the best they
can do to achieve their objectives, given the available opportunities.
Marginal cost - answersIncremental cost
Marginal change - answersTo describe a small incremental adjustment to an existing
plan of action
Incentives - answersSomething that induces a person to do something
Tariff - answerstax on goods produced abroad and sold domestically
World Price - answersthe price of a good that prevails in the world market for that good
Scarcity - answersthe limited nature of society's resources
Economics - answersthe study of how society manages its scarce resources
, Efficiency - answersthe property of society getting the most it can from its scarce
resources
Equality - answersthe property of distributing economic prosperity uniformly among the
members of society
Market Economy - answersan economy that allocates resources through the
decentralized decisions of many firms and households as they interact in markets for
goods and services
Property Rights - answersthe ability of an individual to own and exercise control over
scarce resources
Market Failure - answersa situation in which a market left on its own fails to allocate
resources efficiently
Market Power - answersthe ability of a single economic actor (or small group of actors)
to have a substantial influence on market prices
Productivity - answersthe quantity of goods and services produced from each unit of
labor input
Inflation - answersan increase in the overall level of prices in the economy
Business Cycle - answersfluctuations in economic activity, such as employment and
production
Circular Flow Diagram - answersa visual model of the economy that shows how dollars
flow through markets among households and firms
Production Possibilities Frontier - answersa graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
Microeconomics - answersthe study of how households and firms make decisions and
how they interact in markets
Macroeconomics - answersthe study of economy-wide phenomena, including inflation,
unemployment, and economic growth
Positive Statements - answersclaims that attempt to describe the world as it is
Normative Statements - answersclaims that attempt to prescribe how the world should
be
Opportunity cost - answerswhatever must be given up to obtain some item
Explicit cost - answers...
Duplicit cost - answers...
Rational people - answersPeople who systematically and purposefully do the best they
can do to achieve their objectives, given the available opportunities.
Marginal cost - answersIncremental cost
Marginal change - answersTo describe a small incremental adjustment to an existing
plan of action
Incentives - answersSomething that induces a person to do something
Tariff - answerstax on goods produced abroad and sold domestically
World Price - answersthe price of a good that prevails in the world market for that good
Scarcity - answersthe limited nature of society's resources
Economics - answersthe study of how society manages its scarce resources
, Efficiency - answersthe property of society getting the most it can from its scarce
resources
Equality - answersthe property of distributing economic prosperity uniformly among the
members of society
Market Economy - answersan economy that allocates resources through the
decentralized decisions of many firms and households as they interact in markets for
goods and services
Property Rights - answersthe ability of an individual to own and exercise control over
scarce resources
Market Failure - answersa situation in which a market left on its own fails to allocate
resources efficiently
Market Power - answersthe ability of a single economic actor (or small group of actors)
to have a substantial influence on market prices
Productivity - answersthe quantity of goods and services produced from each unit of
labor input
Inflation - answersan increase in the overall level of prices in the economy
Business Cycle - answersfluctuations in economic activity, such as employment and
production
Circular Flow Diagram - answersa visual model of the economy that shows how dollars
flow through markets among households and firms
Production Possibilities Frontier - answersa graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
Microeconomics - answersthe study of how households and firms make decisions and
how they interact in markets
Macroeconomics - answersthe study of economy-wide phenomena, including inflation,
unemployment, and economic growth
Positive Statements - answersclaims that attempt to describe the world as it is
Normative Statements - answersclaims that attempt to prescribe how the world should
be
