Peter Smith Book Chapter 1 Key Terms

·         Scarcity – A situation that arises when people have unlimited wants in the face of limited resources.

·         Opportunity costs – In decision making, the value of the next-best alternative that could have been chosen.

·         Marginal analysis – An approach to economic decision making based on considering the additional (marginal) benefits and costs of a small change in behaviour.

·         Market economy – An economy in which market forces are allowed to guide the allocation of resources.

·         Centrally planned economy – An economy in which decisions on resource allocations are guided by the state.

·         Mixed economy – An economy in which resources are allocated partly through price signals and partly on…