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Economics
The study of how society allocates its scarce resources.
Microeconomics
The study of how households and firms make decisions and how they interact in markets.
Macroeconomics
The study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Scarcity
The limited nature of society's resources.
Trade-offs
Choices individuals, firms, and governments face due to scarce resources, involving benefits and costs.
Opportunity Costs
The value of the sacrifice made to pursue a course of action.
Factors of Production
Inputs used to produce goods and services.
Land
Natural resources or 'gifts of nature' not created by human effort.
Labor
People with all their abilities and efforts.
Capital
Equipment and structures used to produce goods and services.
Entrepreneur
A risk-taking individual in search of profit who coordinates the other factors of production.
Marginal Analysis
The process of making decisions based on comparing marginal benefits and costs.
Marginal Cost
The additional cost of producing one more unit.
Marginal Benefit
The additional benefit received from consuming the next unit of a good or service.
Specialization
Production of goods or performance of tasks based on comparative advantage.
Voluntary Exchange
The act of buyers and sellers freely and willingly engaging in market transactions.
Division of Labor
The division of work into separate tasks performed by different workers.
Command Economy
An economic system where a central authority makes most of the major economic decisions.
Market Economy
An economy that allocates resources through decentralized decisions of many firms and households.
Traditional Economy
An economic system where allocation of resources is the result of ritual, habit, or custom.
Mixed Economy
An economic system where people carry on their affairs with some government involvement.
Consumer Sovereignty
The belief that consumers determine the types of goods and services produced.
Profit Motive
The driving force that encourages improvement of material well-being.
Economic Freedom
The broad goal that promotes individuals' ability to make their own economic decisions.
Economic Security
Protection from adverse economic events.
Economic Equity
The concept of fairness in the economy.
Economic Growth
The ability of an economy to increase production capabilities.
Economic Efficiency
Insuring that decisions are made so that benefits exceed costs.
Economic Stability
Absence of excessive fluctuations in the macroeconomy.
Standard of Living
Quality of life based on ownership of necessities and luxuries.
Human Capital
Accumulation of investments in people, such as education and training.
Absolute Advantage
The ability to produce more of a good than all other producers.
Comparative Advantage
The ability to produce a good at a lower opportunity cost than all other producers.
Free Trade
Unrestricted trade between people and nations.
Trade Barrier
An impediment to the flow of goods/services/capital across boundaries.
Tariff
A tax on goods produced abroad and sold domestically.
Quota
A maximum amount of a good that can be imported into the domestic market.
Embargo
The prohibition on the export or import of a product.
Exchange Rate
The amount of one currency you must give up to get one unit of another currency.
Factor Market
The market in which the factors of production are bought and sold.
Product Market
The market in which finished goods and services are bought and sold.
Circular Flow Model
A model that shows how households and firms circulate resources, goods, and income through the economy.
