The Nature of Economics

Textbook Key Terms

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Model
A simplified representation of reality used to provide insight into economic decisions and events.
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Ceteris Paribus
A Latin phrase meaning 'other things being equal'; it is used in economics when we focus on changes in one variable while holding other influences constant.
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Positive Statement
A statement about what is (i.e. about facts).
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Normative Statement
A statement that involves a value judgement about what ought to be.
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Scarcity
A situation that arises when people have unlimited wants in the face of limited resources.
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Opportunity Cost
In decision making, the value of the next-best alternative forgone.
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Marginal Analysis
An approach to economic decision based on considering the additional (marginal) benefits and costs of a change in behaviour.
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Factors of Production
Resources used in the production process; inputs into production particularly including labour, capital, land and entrepreneurship.
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Renewable Resources
Natural resources that can be replenished, such as forests that can be replanted, or solar energy that does not get used up.
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Non-Renewable Resources
Natural resources that once used cannot be replenished such as coal or oil.
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Production Possibility Frontier (PPF)
A curve showing the maximum combinations of goods or services that can be produced in a given period with available resources.
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Potential Economic Growth
An expansion in the productive capacity of the economy.
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Gross Domestic Product (GDP)
A measure of the economic activity carried out in an economy over a period.
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Division of Labour
A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to a particular stage.
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Market
A set of arrangements that allows transactions to take place.
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Market Economy
An economy in which market forces are allowed to guide the allocation of resources.
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Command Economy
An economy in which decisions on resource allocation are guided by the state.
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Mixed Economy
An economy in which resources are allocated partly through price signals and partly on the basis of intervention by the state.
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Microeconomics
The study of economic decisions taken by individual economic agents, including households and firms.
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Macroeconomics
The study of the interrelationships between economic variables at an aggregate (economy wide) level.
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Command Economy
An economy in which decisions on resource allocation are guided by the state.
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Mixed Economy
An economy in which resources are allocated partly through price signals and partly on the basis of intervention by the state.
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Microeconomics
The study of economic decisions taken by individual economic agents, including households and firms.
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Macroeconomics
The study of the interrelationships between economic variables at an aggregate (economy wide) level.
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Other cards in this set

Card 2

Front

A Latin phrase meaning 'other things being equal'; it is used in economics when we focus on changes in one variable while holding other influences constant.

Back

Ceteris Paribus

Card 3

Front

A statement about what is (i.e. about facts).

Back

Preview of the back of card 3

Card 4

Front

A statement that involves a value judgement about what ought to be.

Back

Preview of the back of card 4

Card 5

Front

A situation that arises when people have unlimited wants in the face of limited resources.

Back

Preview of the back of card 5
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