ECON 203 Lecture 1: Chapter 1

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Virginia Commonwealth University
ECON 203
Laura Razzolini

Chapter 1 Ten Principles of Economics Wednesday, January 18, 2017 7:48 AM Scarcity: limited nature of societys resources Economics: the study of how society manages its scarce resources Efficiency: when society gets the most from its scarce resources Equality: when prosperity is distributed uniformly among societys members Opportunity Cost: What you giveup to obtain something else Incentive: Something that encourages someone to act Market: a group of buyers and sellers Market Economy: allocates resources through the decentralized decisions of many households and firms as they interact in markets. THE MARKET DOESNT FUNCTION WHEN THERE ARENT ANY PROPERTY RIGHTS (enforced by the government) Market Failure: When the market fails to allocate societys resources efficiently Externalities: When the production or consumption of a good affects bystanders (commonly pollution) Market Power: single buyer or seller has substantial influence on market price. Tax can alter the market outcome to promote equity. A countrys standard of living depends on its ability to produce goods and services.
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