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| The condition in which human wants are forever greater than the available supply of time, goods, and resources. |
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| The basic categories of inputs used to produce goods and services. Resources are also called factors of production. Economists divide resources into three categories: land, labor, and capital. |
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| Any natural resource provided by nature that is used to produce a good or service. |
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| The mental and physical capacity of workers to produce goods and services. |
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| The creative ability of individuals to seek profits by taking risks and combining resources to produce innovative products. |
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| A human-made good used to produce other goods and services. |
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| The study of how society chooses to allocate its scarce resources to the production of goods and services to satisfy unlimited wants. |
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| The branch of economics that studies decision making for the economy as a whole. |
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| The branch of economics that studies decision making by a single individual, household, firm, industry, or level of government. |
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| A simplified description of reality used to understand and predict the relationship between variables. |
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| A Latin phrase that means while certain variables change, “all other things remain unchanged” |
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| An analysis limited to statements that are verifiable. |
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| An analysis based on value judgment. |
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| the fundamental economic problem that human wants exceed the availability of time, goods, and resources. Individuals and society therefore can never have everything they desire. |
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| factors of production classified as land, labor, and capital. Entrepreneurship is a special type of labor. An entrepreneur seeks profits by taking risks and combining resources to produce innovative products. |
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| the study of how individuals and society choose to allocate scarce resources to satisfy unlimited wants. Faced with unlimited wants and scarce resources, we must make choices among alternatives. |
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| applies an economy-wide perspective that focuses on such issues as inflation, unemployment, and the growth rate of the economy. |
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| examines individual decision-making units within an economy, such as a consumer’s response to changes in the price of coffee and the reasons for changes in the market price of personal computers. |
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| simplified descriptions of reality used to understand and predict economic events. An economic model can be stated verbally or in a table, a graph, or an equation. If the event is not consistent with the model, the model is rejected. |
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| holds “all other factors unchanged” that might affect a particular relationship. If this assumption is violated, a model cannot be tested. Another reasoning pitfall is to think that association means causation. |
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| Testable Statements, Often is expressed as an if-then statement. |
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| Based on value judgments or opinions and uses words such as good, bad, ought to, and should. |
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| Land (natural resources), labor (human capital, entrepreneurship), and capital (constructed inputs such as factories). |
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| A positive association between two variables. When one variable increases, the other variable increases, and when one variable decreases, the other variable decreases. |
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| A negative association between two variables. When one variable increases, the other variable decreases, and when one variable decreases, the other variable increases. |
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| The ratio of the change in the variable on the vertical axis (the rise or fall) to the change in the variable on the horizontal axis (the run). |
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| A zero association between two variables. When one variable changes, the other variable remains unchanged. |
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| A horizontal or vertical line |
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| What is used to illustrate an independent relationship between two variables? |
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| occurs when two variables change in the same direction |
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| occurs when two variables change in opposite directions |
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| occurs when two variables are unrelated |
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| the ratio of the vertical change (the rise or fall) to the horizontal change (the run). The slope of an upward-sloping line is positive, and the slope of a downward-sloping line is negative. |
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| three-variable relationship |
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| depicted by a graph showing a shift in a curve when the ceteris paribus assumption is relaxed and a third variable (such as annual income) not on either axis of the graph is allowed to change |
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