Resources are limited. We cannot produce/consume all the goods and services we wish to have
Chocies
Choices must be made when allocating society’s scarce resource
Economics
The study of how society manages its scarce resource
Efficiency
Getting the max benefit from scarce resources.
Equality
When benefits are traded uniformly among society's members.
Tradeoff
To achieve greater equality, could redistribute income from wealthy to poor. But this reduces incentive to work and produce, shrinks the size of the economic “pie.”
Opportunity Cost
What you must give up to obtain it.
Marginal Benefit
The benefit from an additional unit of a good.
Marginal Cost
The cost of obtaining an additional unit of good.
Market
A group of buyers and sellers.
Market Economy
Decisions are made by many buyers and many sellers, not by a centralized entity.
Market Failure
When a market fails to allocate an economy's resources effeciently.
Externalities
When the production or consumption of a good affects bystanders. i.e. pollution.
Market Power
When a single buyer or seller has substantial influence on market price. i.e. monopoly.