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Economics
The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity.
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Economic Perspective
The way economists view things from a unique perspective. The economic way of thinking.
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Opportunity Costs
To obtain more of one thing, society forgoes the opportunity of getting the next best thing. The sacrifice is the opportunity cost.
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Utility
The pleasure, happiness, or satisfaction obtained from consuming a good or service.
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Rational Self-Interest
Individuals look for a pursue opportunities to increase their utility.
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Marginal Analysis
Comparisons of marginal benefits and marginal costs, usually for decision making.
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Economic Principle
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions.
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Microeconomics
The part of economics concerned with individual units such as a person, a household, a firm, or an industry.
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Macroeconomics
Examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors.
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Aggregate
A collection of specific economic units treated as if they were one unit.
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Positive Economics
Focuses on facts and cause-and-effect relationships.
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Normative Economics
Incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal (policy economics).
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Economizing Problems
The need to make choices because economic wants exceed economic means.
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Budget Line
A schedule or curve that shows various combinations of two products a consumer can purchase with specific money income.
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Economic Resources
All natural, human, and manufactured resources that go into the production of goods and services.
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Resource Categories
- 1. Land
- 2. Labor
- 3. Capital
- 4. Entrepreneurial Ability
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Land
Includes all natural resources ("gifts of nature") used in the production process, such as arable land, forests, mineral and oils, deposits, and water resources.
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Labor
Consists of the physical and mental talents of individuals used in producing goods and services.
i.e. Logger, retail clerk, teacher, pro football player, nuclear physicist.
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Capital
Capital goods includes all manufactured aids used in producing consumer goods and services.
i.e. All factory, storage, transportation, and distribution facilities, as well as tools and machinery.
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Investment
The purchase of capital goods.
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Entrepreneurial Ability
Special human resources distinct from labor. Innovator, risk bearer, takes initiative, and creative.
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Factors of Production (Inputs)
- 1. Land
- 2. Labor
- 3. Capital
- 4. Entrepreneurial Ability
*combined to produce goods and services*
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Production Possibilities Curve
The curve displays the different combinations of goods and services that society can produce in a fully employed economy.
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Law of Increasing Opportunity Costs
As the production of a particular good increases, the opportunity cost of producing an additional unit rises.
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Economic Growth
A greater abundance of resources will result in a greater potential output of one or both products at each alternative. The economy will have achieved economic growth in the form of expanded potential output.
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