VOCAB - 1. Introduction to Economics

Market

a place where buyers and sellers come together to carry out an exchange

Scarcity

resources are limited and cannot satisfy unlimited human needs and wants

Choice

selecting among alternatives due to the scarcity of resources

Efficiency

making the best possible use of scarce resources to avoid waste

Equity

the condition of being fair or just (not same as equality)

Economic-well being

levels of prosperity, economic satisfaction and standards of living among the members of a society

Sustainability

ability of the present generation to satisfy its needs without limiting future generations' ability to satisfy their own needs

Change

(the economics world is in a constant state of flux)

Interdependence

economic decision-makers interact with and depend on each other

Intervention

government involvement with the workings of markets

Resources (FoP)

inputs used to produce goods and services

Land

all natural resources used to produce goods and services

Labour

physical and mental human effort used to produce goods and services

Capital (physical)

man-made factor of production used to produce goods and services

Human Capital

skills, abilities, health, and knowledge acquired by people to make them more productive

Entrepreneurship

ability to combine land, labor, and capital to produce goods and services

Income

money people receive from their employment as well as other sources

Oppertunity cost

value of the next best alternative given up for the chosen alternative

Free good

good that is not scarce and has no opportunity cost

Economic good

good that is scarce and has an opportunity cost

Resource allocation

assigning available resources to specific uses chosen among many possible alternatives (answers "what to produce" and "how to produce")

Rationing

method used to make resource allocation and income (/output) distribution decisions (answers "for whom to produce")

Distribution of income (/output)

way in which the nation's income is divided among individuals and different income groups in the economy (answers "for whom to produce")

Free market economy

economic system in which the three key economic questions are answered by the voluntary exchange in markets

Planned economy (command/control economy)

economic system in which the three key economic questions are answered by the government or ruler

Mixed economy

combination of a free market economy and a planned economy

Production possibilities

All possible combinations of the maximum amounts of two goods that can produced by an economy (given fixed resources and technology, full employment of resources, and efficiency in production)

Economic growth

increase in the quantity of output (real GDP) produced in an economy over a period of time

Actual growth

growth that occurs due to a decrease in unemployment or an increase in production efficiency

Potential growth (growth in production possibilities)

growth that occurs due to technological improvements and an increase in the quantity and quality of resources

Circular economy

an economy where outputs become future inputs

Circular flow of income

in any given time period, value of total output = total income = total spending

Injections

entry of funds (investment, government spending, exports) into the circular flow of income

Leakages

withdrawal of funds (savings, taxes, imports) from the circular flow of income

Taxes

mandatory payment or charge collected by the government from individuals or businesses

Exports

goods and services sold to other countries

Imports

goods and services purchased from other countries

Positive economics

body of economics based on factual observations and evidence

Normative economics

body of economics involved with beliefs and value judgements about what ought to be

Empirical evidence

verifiable, real-world information