Tradeoffs – Giving up one thing for another. Opportunity Cost – the cost of a purchase/decision of a forgone alternative Efficiency – purchasing the largest attainable output of a desired quantity. Macroeconomics – The study of the economy as a whole. Microeconomics – The study of individual decision making w/in the economy. Market Economy – Economy where individuals make decisions. Free Enterprise – The right for a business to make its own decisions. Capitalism – System w/ free enterprise and private property rights. Output Markets – Business = Sellers; households = Buyers. Input Markets- Business = Buyers; Households = Sellers. Planned Economy – System who has their decisions made by planners. Socialism – System where many factors of production are collectively owned. Mixed Economy – System with combination of market and centralized decision making Laissez Faire – Capitalism with strong emphasis on individual decision making. Invisible Hand Doctrine – States that producers acting in their own self-interest will provide buyers with what they want. Law of Demand – Inverse relationship between price and quantity demanded. Law of Supply
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