Scarcity the limited nature of society‟s resources Economics the study of how society manages its scarce resources Efficiency the property of society getting the most it can from its scarce resources Equity the property of distributing economic prosperity fairly among the members of society Opportunity cost whatever must be given up to obtain some item Marginal changes small incremental adjustments to a plan of action Market economy an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services Market failure a s/tuition in which a market left on its own fails to allocate resources efficiently Externality the impact of one person‟s actions on the well-being of a bystander Market power the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices Productivity the quantity of goods and services produced from each hour of a worker‟s time Inflation an increase in the overall level of prices in the economy Philips curve a curve that shows the short-run tradeoff between inflation and unemployment Business cycle fluctuations in economic activity，such as employment and produaion Circular-flow diagram a visual model of the economy that shows how dollars flow through markets among households and firms Production possibilities frontier 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 Positive statements claims that attempt to do describe the world as it is Normative statements claims that attempt to prescribe how the world should be Absolute advantage the...
