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Economics- Chapter 1 & 2

Terms

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The social science dealing with the use of scarce resources to obtain the maximum satisfaction of society's virtually unlimited economic wants.
Economics
The assumption that factors other than those being considered are held constant.
Ceteris Paribus Assumption
The part of economics concerned with the economy as a whole; with such major aggregates as the household, business, and government sectors; and with measures of the total economy.
Macroeconomics
The part of economics concerned with such individual units as industries, firms, and households and with individual markets, specific goods and services, and product and resource prices.
Microeconomics
(1) The use of all available resources to produce want-satisfying goods and services; (2) the situation in which the unemployment rate is equal to the full-employment unemployment rate and there is frictional and structural but no cyclical unemployment (
Full Employment
The comparison of marginal ("extra" or "additional") benefits and marginal costs, usually for decision making.
Marginal Analysis
An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities.
Capitalism
The analysis of facts or data to establish scientific generalizations about economic behavior.
Positive Economics
The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
Normative Economics
The choices necessitated because society's economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).
Economizing Problem
The limited quantities of land, capital, labor, and entrepreneurial ability that are never sufficient to satisfy people's virtually unlimited economic wants.
Scarce Resources
Economic resources: land, capital, labor, and entrepreneurial ability.
Factors of Production
Natural Resources ("free gifts of nature") used to produce goods and services.
Land
Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
Capital
People's physical and mental talents and efforts that are used to help produce goods and services.
Labor
The human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks.
Entrepreneurial Ability
The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal.
Allocative Efficiency
The production of a good in the least costly way; occurs when production takes place at the output at which average cost is a minimum.
Productive Efficiency
The amount of other products that must be forgone or sacrificed to produce a unit of a product.
Opportunity Cost
The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.
Law of Increasing Opportunity Costs
A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types.
Economic System
(1) An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase of real output (gross domestic product) or real output per capita.
Economic Growth
A market in which products are sold by firms and bought by households.
Product Market
A market in which households sell and firms buy resources or the services of resources.
Resource Market
In what ways are resources scarce?
1. Quantitatively limited
2. Limited alternative uses
What are the assumptions for the production possibilities table?
1. Full employment & full production
2. Supply of resources is fixed
3. Technology is constant
4. Only two goods are produced.

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