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| The study of how people, institutions, and society make economic choices under conditions of scarcity. |
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| A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs of their actions. |
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| The value of the good, service, or time forgone to obtain something else. |
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| Statement that there is no free lunch. |
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| You may be treated to launch, making it "free" for you, but someone bears a cost. |
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| Pleasure, happiness, or satisfaction. |
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| People make decisions with some desired outcome in mind. |
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| Comparsions of marginal benefits and marginal costs |
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| Extra, Additional, Change In. |
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| The systematic pursuit of knowledge by observing facts and formulating and testing hypotheses to obtain theories, principles, and laws. |
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| Statement about economic behavior that enable prediction of probable effects of certain actions. |
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| The assumption that factors other than those being considered do not change. This is also known as other-things-equal assumption. |
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| Individuals and society need to make choices because economic wants are unlimited but the means for satisfying those wants are limited. |
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| Collection of specific economic units treated as if they were one unit. |
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| The part of economics concerned with individual decision-making units, such as a consumer, a worker, or a business. |
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| The part of economics concerned with the economy as a whole or major components of the economy. |
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| Things needed to survive. Includes but is not limited to water, food, shelter, and clothing. |
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| Things wanted but unnecessary for life. Includes but is not limited to perfumes, yachts, and sports cars. |
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| Known as the budget line, it is a schedule or curve that shows various combinations of two products a consumer can purchase with specific money income. |
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| Combinations beyond the budget constraint. |
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| Combinations within or on the budget constraint. |
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| Constant Opportunity Cost |
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| An opportunity cost that remains the same as consumers shift purchases from one product to another along a straight-line budget line. |
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| resources used in the production of goods and services. They are natural resources; labor; capital; and entrepreneurship. |
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| Also known as land, this includes all natural resources or "gifts of nature". |
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| The physical and mental talents of individuals used in producing goods and services. |
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| Also known as Capital goods, this includes all manufactured aids used in producing consumer goods and services. Such examples are factory, storage, transportation, and distributions facilities, as well as tools and machinery. |
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| Also known as Entrepreneurial Ability, the human talent that combines the other resources to produce a product, make strategic decisions, and bear risks. |
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| Economic Resources, which are land, labor, capital, and entrepreneurial ability (Entrepreneurship). |
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| The economy is employing all its available resources. |
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| The quantity and quality of the factors of production are fixed. |
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| The state of technology (the methods used to produce output) is constant. |
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| The economy is producing only two goods, consumer and capital goods. |
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| Products that satisfy our wants directly. |
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| Capital Goods (As it pertains to Production Possibilities Model) |
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| Products that satisfy our wants indirectly by making possible more efficient production of consumer goods. |
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| Generalization of Production Possibilities Curve |
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| A fully employed society must sacrifice one type of good for another ultimately. |
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| Production Possibilities Curve |
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| Represents some maximum output of the two products. |
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| Law of Increasing Opportunity Costs |
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| The more of a product that society produces, the greater is the opportunity cost of obtaining an extra unit. |
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| The idea that you generally want to get the lowest hanging fruit, or the cheapest and most efficient resources first, before the more expensive and less efficient. |
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| Economic is the result of... |
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| Increases in supplies of resources, improvements in resource quality, and technological advancements. |
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| The positive relationship between two variables that change in the same direction. |
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| The negative relationship between two variables that change in opposite directions. |
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| The variable causing a change in some other (dependent) variable; the causal variable. |
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| The variable that changes as a result of a change in some other variable; the "outcome variable". |
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| The ratio of the vertical change (the rise) to the horizontal change (the run) between any two points on a line. |
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| The Command (market) System |
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| An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities. |
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| An economic system in which most property resources are owned by the government and economic decisions are made by a central government body. |
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| A particular set of institutional arrangements and a coordinating mechanism for producing goods and services. |
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| An institution or mechanism that brings buyers and sellers together. |
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| The use of resources of an individual, region, or nation to produce one or few goods and services rather than the entire range of goods and services. |
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| The separation of the work required to produce a product into a number of different tasks that are performed by different workers. |
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| Any item sellers generally accept and buyers generally use to pay for goods and services. |
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| The exchange of one good or service for another good or service. |
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| Any item that is generally acceptable to sellers in exchange for gods and services. |
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| The Four Fundamental Questions of Economics |
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What Goods and services will be produced?
How will the goods and services be produced?
Who will get the goods and services?
How will the system promote progress? |
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| Determination by consumers of the types and quantities of goods and services that will be produced with the economy's scarce resources. |
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| The "Votes" that consumers and entrepreneurs cast for the production of consumer and capital goods when they purchase them in product and resource markets. |
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| The idea that the creation of new products and production methods may simultaneously destroy the market power of existing firms. |
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| The term coined by Adam Smith that speaks of the tendency of firms and resource suppliers that are seeking to further their own self interest in competitive markets to also promote the interest of society as a whole. |
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| The Circular Flow Diagram |
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| The flow of resources from households to firms and of products from firms to households. |
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| A market in which households sell and firms buy economic resources. |
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| A market in which goods and services (products) are sold by firms and bought by households. |
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| Business owned and operated by one person. |
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| Two or more individuals (the partners) agree to own and operate a business together. |
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| Similar to other business types, however it sells stocks to raise funds but is legally distinct and separate from the individual stockholders. |
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| Goods such as cars, refrigerators, personal computers, and anything else that is expected to last more than three years. |
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| Goods such as food, clothing, and gasoline that have expected lives of less than three years. |
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| The work done by people such as lawyers, physicians, and recreational workers. |
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| Economies that largely orient themselves on a certain economy. For instance, the USA focuses 60% of economy on services and is considered a "Service-Oriented Economy". |
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| Freedom of Economic Choice |
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| The citizens right to buy and sell goods and products. |
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| Freedom of Economic Enterprise |
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| Citizens right to buy, to sell, and to produce goods and services. |
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| A person's right to own, utilize and bequeath property. |
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| One business against another. |
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| Focuses on conserving resources now to use them later. |
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| Utilizes the resources now, but leaves less for the future. |
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