Introduction to Economics (Vocabulary Flashcards)

Vocabulary flashcards covering key terms from the lecture notes.

Economics

Social science that studies how scarce resources are used to satisfy wants and needs; how society decides what to produce, how to produce, and for whom.

Scarcity

The fundamental problem of unlimited wants and limited resources; forces choices and involves costs.

Rational behavior

Behavior in which individuals act rationally and in their self-interest to maximize satisfaction.

Marginal analysis

Evaluation of the additional costs and benefits of a decision; marginal means extra or additional.

Land

Natural resources used in production; land is the primary factor of production.

Labor

Human effort (mental or physical) used in production; economic activity of man with head and hand.

Capital

Produced means of production used to create wealth, including factories, machines, tools, raw materials, and transport; includes human, physical, and financial capital.

Entrepreneurship

Person who combines land, labor, and capital to produce goods and decides what, how, and where to produce, bearing the risks.

Microeconomics

Study of individual economic units and markets; the details of the economy.

Macroeconomics

Study of the economy as a whole; aggregate measures like total output and total consumption.

Positive economics

Focuses on facts and cause–effect; describes how the economy actually is and builds theories.

Normative economics

What the economy should be like; prescribes policies to achieve desired outcomes.

Theoretical economics

Deriving theories and principles from facts and models.

Policy economics

Applying theories to develop policies based on hypotheses.

Economic growth

Goal of policy: development of a higher standard of living.

Full employment

Goal of policy: stable jobs for citizens.

Economic efficiency

Goal: use resources to maximum potential.

Price-level stability

Goal: avoid inflation and deflation.

Economic freedom

Goal: freedom for businesses, workers, and consumers to participate in economic activity.

Equitable distribution of income

Goal: reduce or avoid large gaps between the Haves and Have-nots.

Economic security

Goal: provide for chronically ill, disabled, laid off, and others in need.

Balance of trade

Goal: maintain an overall trade balance with the rest of the world.

Factors of Production

Land, Labor, Capital, and Entrepreneurship—the resources used to produce goods and services.

Land (as a factor of production)

Natural resources used in production: resources on, below, or above the earth's surface.

Labor (as a factor of production)

Human effort (head and hand) used in production.

Capital (as a factor of production)

Produced means of production—factories, machines, tools, materials, etc.; includes human, physical, and financial capital.

Entrepreneur (as a factor of production)

The person who organizes the other factors and makes strategic production decisions, taking on risk.

Macro vs Micro economics

Macro: study of the economy as a whole; Micro: study of individual markets and units.

Economic policy

Application of theories and hypotheses to create and evaluate government policies.

The four factors of production

Land, Labour, Capital, and Entrepreneurship—the essentials of production.