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Economics Ch 1
A list of vocabulary words and key phrases from Essentials of Economics Chapter 1
19
Economics
Undergraduate 2
01/17/2012

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Term
Economics
Definition
The study of how best to allocate scarce resources among competing uses.
Term
Opportunity cost
Definition
The most desired goods and services that are forgone in order to obtain something else
Term
Factors of Production
Definition
Resource inputs used to produce goods and services. Like land, labor, capital.
Term
Production Possibilities
Definition
The alternative combinations of goods and services that could be produced in a given time period with all available resources and technology.
Term
Investment
Definition
Expenditures on (production of) new plant equipment (capital) in a given time period, plus changes in business inventories. (To be best future minded)
Term
Economic growth
Definition
An increase in output (real GDP) an expansion of production possibilities.
Term
Political Process
Definition
economic decisions made by congress.
Term
Market Mechanism
Definition
The use of market prices and sales to signal desired outputs.
Term
Central Planning
Definition
The use of government to make decisions for the masses. Regarding the WHAT HOW and FOR WHOM.
(Communism)
Term
Laissez Faire
Definition
The doctrine of "leave it alone" of nonintervention by government in the market mechanism.
Term
Mixed Economy
Definition
A balance of the market mechanism and central planning. Market decides private endeavors and government does bigger things.
Term
Market Failure
Definition
An imperfection in the market mechanism that prevents optimal outcomes.
Term
Externalities
Definition
Costs of a market activity borne by a third party. (Pollution, waste, with no consequences)
Term
The first goal of economics
Definition
Satisfy the WHAT HOW and FOR WHOM questions. (Definition of economics)
Term
The second goal of economics
Definition
To predict how changes in government policy or market institutions will affect economic outcomes.
Term
Government Failure
Definition
When the government does not help, or even hurts the current economic situation. (Negative intervention).
Term
Macroeconomics
Definition
The study of aggregate economic behavior of the economy as a whole. (Big scale)
Term
Microeconomics
Definition
The study of individual behavior in the economy, of the components of the larger economy.
Term
Ceteris Paribus
Definition
The assumption that nothing else changes.
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