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Vocab words - Market chooses price not producers choose...

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Market chooses price, not producers choose price Chapter 1: 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-Size of the pie-Maximum you can get out of your resources Equity: The property of distributing economic prosperity fairly among the members of society-How the pie is divided-The fairness of the distribution of resources Opportunity cost: Whatever must be given up to obtain some item Rational People: People who systematically and purposefully do the best they can to achieve their objectives Marginal changes: Small incremental adjustments to a plan of action Incentive: Something that induces a person to act Market Economy: An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for good and services Property Rights: The ability of an individual to own and exercise control over scarce resources Market Failure: A situation in which a marker left on its own fails to allocate resources efficiently Externality: The impact of one person’s actions on the wellbeing of a bystander
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