About this Flash Card Set
20 Cards
by james_okafor
Clear, plain-language definitions of the core economics terms every intro student needs, each with a quick example. A friendly foundation for understanding how economies work.
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What is scarcity?
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The basic economic problem that resources are limited but human wants are unlimited, forcing choices. Example: a school has a fixed budget and cannot fund every program it wants.
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What is opportunity cost?
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The value of the next-best alternative you give up when you make a choice. Example: if you spend two hours studying, the opportunity cost might be the shift you could have worked.
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What is supply?
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The quantity of a good or service that producers are willing and able to sell at various prices. Example: bakeries offer more loaves for sale when bread prices rise.
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What is demand?
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The quantity of a good or service that buyers are willing and able to purchase at various prices. Example: shoppers buy more umbrellas when rain is forecast.
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What is a market?
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Any place or system where buyers and sellers come together to exchange goods, services, or resources. Example: a farmers' market or an online marketplace.
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What is GDP (Gross Domestic Product)?
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The total value of all goods and services produced within a country in a given period, usually a year. It is a common measure of the size of an economy.
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What is inflation?
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A general rise in prices over time, which reduces the purchasing power of money. Example: if inflation is 3%, something that cost $100 last year costs about $103 this year.
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What is deflation?
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A general fall in prices over time, the opposite of inflation. It can sound good for shoppers but may signal weak demand and can slow an economy.
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What is a recession?
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A significant, widespread decline in economic activity lasting more than a few months, often marked by falling output and rising unemployment.
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What is unemployment?
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The condition of people who are able to work and actively seeking a job but cannot find one. The unemployment rate is the share of the labor force that is unemployed.
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What is fiscal policy?
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A government's use of spending and taxes to influence the economy. Example: cutting taxes or increasing public spending to encourage growth during a downturn.
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What is monetary policy?
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A central bank's actions to manage the money supply and interest rates. Example: the U.S. Federal Reserve raising interest rates to help cool inflation.
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What is an interest rate?
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The cost of borrowing money or the reward for saving it, expressed as a percentage. Example: a 5% rate on a loan means you pay $5 per year for every $100 borrowed.
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What is the difference between microeconomics and macroeconomics?
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Microeconomics studies individual choices, such as households and single firms, while macroeconomics studies the whole economy, including growth, inflation, and unemployment.
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What is capitalism?
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An economic system in which private individuals and businesses own resources and property and produce goods for profit, with prices largely set by markets.
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What is socialism?
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An economic system in which the community or government owns or heavily controls major resources and production, aiming to distribute wealth more equally.
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What is a market economy?
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An economy where the decisions of buyers and sellers, guided by supply and demand, determine what is produced and at what prices, with limited government control.
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What is the difference between goods and services?
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Goods are physical products you can touch, like a phone or an apple, while services are actions others perform for you, like a haircut or a bus ride.
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What are the factors of production?
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The resources used to produce goods and services: land (natural resources), labor (workers), capital (tools and machines), and entrepreneurship (organizing and risk-taking).
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What is an incentive in economics?
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Something that motivates people to act in a certain way, such as a reward or a penalty. Example: a discount is an incentive to buy, while a tax is an incentive to buy less.
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