Key Terms

Key Terms

Ceteris paribus

The biggest assumption in Economics meaning “other things being equal.”

Economics

The study of how humans make choices under conditions of scarcity.

Globalization

The trend in which buying and selling in markets have increasingly crossed national borders.

Factors of production

Include land, labor capital, and entrepreneurial ability.

Goods and services market

A market in which firms are sellers of what they produce and households are buyers.

Invisible hand

Idea that self-interested behavior by individuals can lead to positive social outcomes.

Macroeconomics

The branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.

Market economy

An economy where economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand.

Market

Interaction between potential buyers and sellers; a combination of demand and supply.

Microeconomics

The branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms.

Scarcity

When human wants for goods and services exceed the available supply.

Theory

A representation of an object or situation that is simplified, while including enough of the key features to help us understand the object or situation.

Opportunity cost

Measures cost by what is given up in exchange; opportunity cost measures the value of the forgone alternative. (1)