Chapter 1: Introduction: What Is Economics?

Vocabulary flashcards based on key terms from Chapter 1 of Macroeconomics: Principles, Applications, and Tools.

Economics

The study of choices when there is scarcity.

Scarcity

The condition in which the resources we use to produce goods and services are limited.

Factors of Production

The resources used to produce goods and services, also known as production inputs or resources.

Natural Resources

Resources provided by nature and used to produce goods and services.

Labor

Human effort, including both physical and mental, used to produce goods and services.

Physical Capital

The stock of equipment, machines, structures, and infrastructure that is used to produce goods and services.

Human Capital

The knowledge and skills acquired by a worker through education and experience and used to produce goods and services.

Entrepreneurship

The effort used to coordinate the factors of production—natural resources, labor, physical capital, and human capital—to produce and sell products.

Positive Analysis

A type of economic reasoning that answers the question 'What is?' or 'What will be?'

Normative Analysis

A type of economic reasoning that answers the question 'What ought to be?'

Economic Model

A simplified representation of an economic environment, often employing a graph.

Variable

A measure of something that can take on different values.

Ceteris Paribus

The Latin expression meaning that other variables are held fixed.

Marginal Change

A small, one-unit change in value.

Macroeconomics

The study of the nation's economy as a whole, focusing on issues of inflation, unemployment, and economic growth.

Microeconomics

The study of the choices made by households, firms, and governments, and how these choices affect the markets for goods and services.

Positive Relationship

A relationship in which two variables move in the same direction.

Negative Relationship

A relationship in which two variables move in opposite directions.

Slope of a Curve

The vertical difference between two points (the rise) divided by the horizontal difference (the run).