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Chapter 1
Economic Issues And Concepts
5
Economics
Undergraduate 1
09/13/2010
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Term
Economy
 Definition
A system in which scarce resources are distributed among competing uses.
Term
Main Characteristics of Market Economies
 Definition

  1. Self Interest:Individual pursue their own self interest.
  2. Incentives:Sellers want to buy when prices are high, buyers when low
  3. Market Price and Quantities
  4. Institutions: Private prop, freedom of contract, rule of law.
Term

 

  1. Factors of Production

 

 Definition

1. Land: Natural Endowments, lakes, crude oil, etc

2. Labour: Mental and physical human resources incl. management skills.

3. Capital : Mechanical aids to production like tools, machines, buildings
Term
Opportunity Cost
 Definition
The cost of using resources for a certain purpose, measured by the benefit given up by not using them in their best alternative use.
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