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Chapter 1
Terms for Chapter 1.
26
Economics
Undergraduate 1
02/06/2010

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Term
Economics
Definition

The social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. 

Term
Macroeconomics
Definition
The part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy.
Term
Microeconomics
Definition

The part of economics concerned with decision making by individual units such as a household, a firm, or an industry and with individual markets, specific goods and services, and profit and resource prices.

Term
Opportunity costs
Definition

The amount of other products that must be forgone or sacrificed to produce a unit of a product.

Term
Other-things-equal assumption
Definition

The assumption that factors other than those being considered are held constant; ceteris paribus assumption.

Term
Positive economics
Definition
The analysis of facts or data to establish scientific generalizations about economic behavior.
Term
Productions possibilities curve
Definition

A curve showing the different combinations of two goods or services that can be produced in a full employment, full production economy where the available supplies of resources and technology are fixed.

Term
Scientific method
Definition
The procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypotheses to obtain theories, principles, and laws.
Term
aggregate
Definition
 A collection of specific economic units treated as if hey were one.  [Ex: all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product
Term
budget line
Definition
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices.
Term
capital or capital goods
Definition
Human-made resource (buildings, machinery, and equipment) used to produce goods and services goods that do not directly satisfy human wants; also called capital goods. 
Term
consumer goods
Definition
Products and services that satisfy human wants directly. 
Term
economic growth
Definition

(1) An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase of real growth output (gross domestic product) or real output per capita. 

Term
economic perspective
Definition
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions.
Term
economic principle
Definition
A widely-accepted generalization about the economic behavior of individuals or institutions.
Term
economic resources
Definition
The land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production.
Term
economizing the problem
Definition
The choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).
Term
entrepreneurial ability
Definition
The human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risk. 
Term
factors of production
Definition
Economic resources: land, labor, capital, & entrepreneurial ability.
Term
investment
Definition
Spending for the production and accumulation of capital and additions to inventories.
Term
labor
Definition
People's physical and mental talents and efforts that are used to help produce goods and services. 
Term
land
Definition
Natural resources used to produce goods and services. 
Term
law of increasing opportunity costs
Definition
The principle that as the production of a good increases, the opportunity cost of production an additional unit rises. 
Term
marginal analysis
Definition
Comparisons of marginal benefits and marginal costs for decision making.
Term
normative economics
Definition
The part of economics involving value judgements about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
Term
utility
Definition
The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service.
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