ECON 1 Study Guide - Midterm Guide: Absolute Advantage, Fiscal Policy, Opportunity Cost
Document Summary
10/20/16 thursday, during class (come a little early) Scarcity - the limited nature of society"s resources. Economics - the study of how society manages its scarce resources. Incentives - something that induces a person to act, the prospect of a reward or punishment. Rational people - systematically and purposefully do the best they can to achieve their objectives. Market - a group of buyers and sellers (need not be in a single location) Market economy - allocates resources through the decentralized decisions of many households and firms and they interacts in markets. Invisible hand - prices guide self-interested households and firms to make decisions that, in many cases, maximize society"s economic well-being. Efficiency - when society gets the most from its scarce resources. Equality - when prosperity is distributed uniformly among society"s members. Opportunity cost - of any item is whatever must be given up to obtain it.
