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Lesson Flashcards: The Fundamental Economic Problem Economics

Information failure

The deficiency in available information necessary for making economic choices

Opportunity cost

The effects or consequences of alternative options in an economic choice (if the effects are financial, which includes profits and losses, the opportunity cost can be written as the difference between the alternate and chosen options)

Macroeconomics

The study of the economic behaviors of an overall economy or society (economic choices examined here include the ones made by the national government as well as those made by international organizations)

Economic choices

Made by individuals or economic entities to address the fundamental economic problem (the objective of any economic choice is to allocate limited resources to maximize their utility)

The four branches of economics

Macroeconomics, microeconomics, welfare economics, and development economics

Efficiency of an economic system

A measure of the amount of resources wasted during their allocation within the economy (an economic system is efficient if few to no resources are wasted)

Welfare economics

The study of various social welfare models, aiming to design an efficient economic system to deliver available resources to individuals in need

Utility

The total satisfaction derived from the consumption of different goods and services

Development economics

The study of economic aspects of developing countries and various priorities and strategies for these countries to achieve economic growth over time

The fundamental economic problem

The problem that human needs are diverse and continuously increasing, while resources to satisfy them are limited

Microeconomics

The study of economic problems in the context of small entities, such as individuals or firms (economic choices studied here concern behaviors of, and interactions between, consumers and producers of resources)

Economics

A social science studying how individuals and societies use scarce resources to satisfy increasing and diverse needs

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