| Term | Definition |
|---|
| Economics | The study of how people use their scarce resources to satisfy their unlimited wants |
| Resources | The inputs, or factors of production, used to produce the goods and services that people want |
| Labor | Physical and mental effort used to produce goods and services; a resource |
| Capital | The buildings, equipment, and human skills used to produce goods and services; a resource |
| Natural resources | All gifts of nature used to produce goods and services; a resource |
| Entrepreneurial ability | Managerial and organizational skills needed to start a firm, combined with the willingness to take the risk of profit of loss; a resource |
| Entrepreneur | A profit-seeking decision maker who starts an idea, organizes an enterprise to bring that idea to life, and assumes the risk of the operation |
| Wages | Payment to resource owners for their labour |
| Interest | Payment to resource owners for the use of their capital |
| Rent | Payment to resource owners for the use of their natural resources |
| Profit | Reward for entrepreneurial ability; sales revenue minus resource cost |
| Good | A tangible product used to satisfy human wants |
| Service | An activity, or intangible product, used to satisfy human wants |
| Scarcity | Occurs when the amount people desire exceeds the amount available at a zero price |
| Market | A set of arrangements by which buyers and sellers carry out exchange at mutually agreeable terms |
| Product market | A market in which a good or service is bought and sold |
| Resource market | A market in which a resource is bought and sold |
| Circular-flow model | A diagram that traces the flow or resources, products, income, and revenue among economic decision makers |
| Rational self-interest | Individuals try to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit |
| Marginal | Incremental, additional, or extra; used to describe a change in an economic variable |
| Economic theory (Economic model) | A simplification of reality mused to make predictions about cause and effect in the real world |
| Variable | A measure, such as price or quantity, that can take on different values at different times |
| Other-things-constant assumption | The assumption, when focusing on the relation among key economic variables, that other variables remain unchanged |
| Behavioral assumption | An assumption that describes the expected behavior of economic decision makers, what motivates them |
| Hypothesis | A theory about how key variables relate |
| Positive economic statement | A statement that can be proved or disproved by reference to facts |
| Normative economic statement | A statement that reflects an opinion, which cannot be proved or disproved by reference to facts |
| Association-is-causation fallacy | The incorrect idea that if two variables are associated in time, one must necessarily cause the other |
| Fallacy of composition | The incorrect belief that what is true for the individual, or part, must necessarily be true for the group, or the whole |
| Secondary effects | Unintended consequences of economic actions that may develop slowly over time as people react to events |
Combine with other sets
Share on Facebook
Share on MySpace