Chapter 1: What is Economics? & Graphing Data

Vocabulary flashcards based on Chapter 1 economics lecture notes and appendix on understanding graphs.

Scarcity

Our inability to satisfy all our wants.

Economics

The social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity.

Microeconomics

The study of choices that individuals and businesses make, the way these choices interact in markets, and the influence of government on those choices.

Macroeconomics

The study of the effects on the national economy and the global economy of the choices that individuals, businesses, and governments make.

Goods and Services

The objects that people value and produce to satisfy wants.

Factors of Production

Productive resources used to produce goods and services, grouped into land, labour, capital, and entrepreneurship.

Land

The "gifts of nature" (natural resources) that we use to produce goods and services.

Labour

The work time and effort that people devote to producing goods and services.

Physical Capital

The tools, instruments, machines, buildings, and other constructions that are used to produce goods and services.

Human Capital

The knowledge and skills that people obtain from education, on-the-job training, and work experience.

Entrepreneurship

The human resource that organizes land, labour, and capital.

Rent

The income earned by selling the services of land.

Wages

The income earned by labour.

Interest

The income earned by capital.

Profit

The income earned by entrepreneurship.

Trade-off

Giving up one thing to get something else.

Opportunity Cost

The highest-valued alternative that we give up to get something.

Marginal Benefit

The benefit from pursuing an incremental increase in an activity.

Marginal Cost

The opportunity cost of pursuing an incremental increase in an activity.

Rational Behaviour

Doing more of an activity if the marginal benefit is greater than the marginal cost.

Rule of Law

The paramount institution that protects private property and facilitates voluntary exchange in markets.

Positive Statements

Statements that describe how the world actually is ("what is") and can be tested and possibly rejected if there is insufficient evidence.

Normative Statements

Statements that tell how the world should be ("what ought to be"), depending on value judgments and cannot be tested.

Economic Model

A description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand.

Economic Theory

A generalization that summarizes what we think we understand about the economic choices that people make and the performance of industries and entire economies.

Ceteris Paribus

A logical device meaning "other things being equal," used to isolate cause-and-effect relationships by changing only one variable at a time while holding all other relevant factors unchanged.

Fallacy of Composition

The false statement that what is true for the parts is true for the whole or what is true for the whole is true for the parts.

Post Hoc Fallacy

The error of reasoning that a first event causes a second event because the first occurs before the second ("Post hoc, ergo propter hoc").

Graph

A visual representation of a relationship between any two variables, consisting of an x (horizontal) axis and a y (vertical) axis.

Origin

The point where the two axes intersect on a graph, identified as $(0, 0)$.

Coordinate

One of a set of numbers used to identify the location of a point on a graph.

Time-Series Graph

A graph that measures time along the x-axis and the variable or variables of interest along the y-axis, making trends and cyclical patterns easy to spot.

Cross-Section Graph

A graph that shows different observations made at a specific point in time, taking the form of bar charts or pie charts.

Scatter Diagram

A graph that plots the value of one variable on the x-axis and the value of another variable on the y-axis to reveal relationship patterns.

Positive Relationship

A relationship between two variables that move in the same direction, shown by an upward-sloping line or curve.

Negative Relationship

A relationship between two variables that move in opposite directions, shown by a downward-sloping line or curve.

Linear Relationship

A relationship (positive or negative) shown by a straight line.

Non-linear Relationship

A relationship shown by a curve.

Slope of a Relationship

Measured as the change in the value of the variable on the y-axis divided by the change in the value of the variable on the x-axis, calculated as $\frac{\Delta Y}{\Delta X}$.

Slope of a Curved Line at a Point

The slope of a curved line at a point, equal to the slope of a straight line that is tangent to that point.

Slope of an Arc

The slope of a curved line between two points, equal to the slope of a straight line that joins the two points of the arc, representing an average slope.