| Term | Definition |
|---|
| scarcity | The situation in which unlimited wants exceed the limited resources available to fulfill those wants. |
| economics | the study of the choices people make to attain their goals, given scarce resources |
| economic model | a simplified version of reality used to analyze real-world economic situations |
| market | a group of buyers and sellers of a good or service and the instition or arrangement by which they come together to trade. |
| Marginal analysis | analysis that involves comparing marginal benefits and marginal costs. |
| trade-off | the idea that because of scarcity, producing more of one service or good means producing less of another good or service. |
| opportunity cost | the highest valued alternative that must be given up to engage in an activity. |
| centrally planned economy | an economy in which the government decides how economic resources will be allocated |
| market economy | an economy in which the decisions of households and firms interacting in markets allocate economic resources. |
| mixed economy | an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources. |
| productive efficiency | the situation in which a good or service is produced at the lowest possible cost. |
| allocative efficiency | a state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides marginal benefit to society equal to the marginal cost of producing it. |
| voluntary exchange | the situation that occurs in markets when both the buyer and seller of a product are made better off by the transaction. |
| equity | the fair distribution of economic benefits |
| economic variable | something measurable that can have different values, such as the wages of software programmers. |
| positive analysis | analysis concerned with what is |
| normative analysis | analysis concerned with what ought be. |
| microeconomics | the study of how households and firms make choices, how the interact in markets, and how the government attempts to influence their choices. |
| macroeconomics | the study of the economy as a whole, including topics such as inflation, unemployment and economic growth. |
| production possibilities frontier (ppf) | a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. |
| economic growth | the ability of an economy to produce increasing quantities of goods and services. |
| trade | the act of buying or selling |
| absolute advantage | the ability of an individual, a firm, or country to produce more of a good or service than competitiors, using the same amount of resources. |
| comparative advantage | the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. |
| product markets | markets for goods- such as computers- and services- such as medical treatment. |
| factor markets | markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability. |
| factors of production | the inputs used to makegoods and services |
| circular-flow diagram | a model that illustrates how participants in markets are linked. |
| free market | a market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed. |
| entrepreneur | someone who operates a business, bringing together the factor of production-labor, capital, and natural resources-to produce goods and services. |
| property rights | the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it |
Combine with other sets
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