Applied Economics: Nature, Scope, and Fundamentals

Vocabulary flashcards covering the nature, scope, fields, goods classifications, factors of production, and resource characteristics of Applied Economics.

Economics (as a Social Science)

A field of study concerned with the explanation and prediction of observed phenomena in society, specifically how societies solve the fundamental problem of reconciling the unlimited desires of individuals with the scarcity of resources susceptible to alternative uses.

Economics (as an Applied Science)

The practice of using the scientific method—observing reality, presenting questions and problems, and formulating theories and models—following a systematic procedure to solve issues and problems of society.

Microeconomics

The branch of economics that focuses on the behavior of individual economic units and the functioning of markets, examining specific parts of the economy such as individuals, firms, and industries.

Macroeconomics

The branch of economics that studies the functioning of economics as an aggregate, focusing on overall goals like production, the standard of living, unemployment, and inflation through monetary and fiscal policy.

Goods

Anything that yields satisfaction to a person and is used to satisfy human wants and needs.

Tangible Goods

Physical, material goods or commodities.

Intangible Goods

Non-physical goods that take the form of services, such as those rendered by doctors, engineers, and other professionals.

Consumers Goods

Goods intended for the ultimate consumption of consumers, such as toothpaste and bath soap.

Capital Goods (Industrial Goods)

Man-made objects used in the production of other goods and services, such as buildings, machinery, and equipment.

Essential Goods

Goods used to satisfy the basic needs of man, such as foods and medicine.

Luxury Goods

Goods that humans may do without, but which provide comfort and satisfaction, such as perfume, cakes, chocolates, and expensive cars.

Economic Goods

Goods that are useful and scarce, carry an attached value, and require a price to be paid for their use (e.g., air from an air conditioner).

Land (as a Factor of Production)

Natural resources available to create supply, including raw materials from the ground, non-renewable resources (like oil and gold), and renewable resources (like timber and farmland).

Labor (as a Factor of Production)

The work done by people—incorporating education, skills, and motivation—measured by output per hour of worker time, for which the workforce receives wages.

Capital (as a Factor of Production)

Man-made objects like machinery, equipment, chemicals, and commercial buildings used in production, as well as the money companies use to buy resources.

Entrepreneurship (as a Factor of Production)

The capability to develop an idea into a business by combining land, labor, and capital, taking risks to generate supply and earn profits.

Scarcity

The economic condition of having insufficient resources to supply all the desires and needs of individuals.

Multiple Use

A characteristic of resources indicating that they can have more than one possible application (e.g., using a plot of land to plant coffee or to build a factory).

Partially Replaceable

A characteristic of resources where one resource can substitute for another in the production of a good or service (e.g., replacing manual labor with technology).

Opportunity Cost

The forgone alternative resulting from the necessity of making a choice between scarce resources with alternative uses.