← 1.The foundations of economics Export Options Alphabetize Word-Def Delimiter Tab Comma Custom Def-Word Delimiter New Line Semicolon Custom Data Copy and paste the text below. It is read-only. Select All microeconomics the study of the behavior of individual consumers, firms, and industries and the determination of market prices and quantities of good, services, and the factors of production. macroeconomics the study of aggregate economic activity. It investigates how the economy as a whole works. ceteris paribus all other things being held equal. positive economics matters if economics that can be proven to be right or wrong by looking at the facts. normative economics matters of economics that are based upon opinion and so are incapable of being proved to be right or wrong. scarcity the limited availability of economic resources relative to society's unlimited demand for goods and services. land the physical factor of production. it consists of natural resources, some of which are renewable and some of which are non-renewable. labour the human factor of production. it is the physical and mental contribution of the existing work force to production. capital the factor of production that comes from investment in physical capital and human capital. physical capital the stock of manufactured resources. human capital the value of the workforce entrepreneurship the factor of production involving organising and risk-taking. opportunity cost it is the next best alternative forgone when an economic decision is made. free good goods or services which are unlimited in supply and have no opportunity cost are free goods. a free food has an unlimited supply ad market price zero. economic good a good or services which is relatively scarce and so has a price. an opportunity cost is involved if it is consumed. utility the satisfaction of pleasure that an individual derives from the consumption of a good or service. production possible curve it shows the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed. actual output the actual production of goods and services in an economy in a given time period. actual growth this occurs when previously unemployed factors of production are brought in to use. it is represented by a movement from a point within a PPC to a new point nearer to the PPC. potential output the possible production that would be possible in an economy if all available factors were being employed. potential growth this occurs when the quantity and/or quality of factors of production within an economy is increased. it is represented by an outward shift of the PPC. economic growth the growth of real output in an economy over time. usually measured as growth in real GDP. economic development it is a broad concept involving improvement i standards of living, reduction in poverty, improved health and education. sustainable development development that meets the needs of the present without compromising the ability of future generations to meet their own needs. free market economy an economy where the means of production are privately held by individuals and firms, demand and supply determine how much to produce, how/how many to produce, and for whom to produce. planned economy an economy where the means of production are collectively owned. the state determines how much to produce, how/how many to produce, and for whom to produce. transition economy an economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system.