Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| Allocative efficiency | The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal.
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| Capital | Human made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
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| Capital goods | See Capital.
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| Circular flow model | The flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.
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| Command system | An economic system in which most property resources are owned by the government and economic decisions are made by a central government body.
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| Consumer goods | Products and services that satisfy human wants directly.
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| Economic growth | (1) An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase either in real output (gross domestic product) or in real output per capita.
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| Economic problem | Choices are necessary because society's material wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).
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| Economic resources | The land, labour, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production.
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| Economic system | A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy; of which the market economy, command economy, and traditional economy are three general types.
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| Entrepreneurial ability | The human resources that combine the other resources to produce a product, make non-routine decisions, innovate, and bear risks.
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| Factors of production | Economic resources: land, capital, labour, and entrepreneurial ability.
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| Full employment | (1) Use of all available resources to produce want-satisfying goods and services. (2) The situation when the unemployment rate is equal to the full-employment unemployment rate and there is frictional and structural but no cyclical unemployment (and the real output of the economy equals its potential real output).
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| Investment | Spending for the production and accumulation of capital and additions to inventories.
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| Labour | The physical and mental talents and efforts of people that are used to produce goods and services.
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| Land | Natural resources ("free gifts of nature") used to produce goods and services.
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| Law of increasing opportunity costs | As the production of a good increases, the opportunity cost of producing an additional unit rises.
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| Market system | All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in these markets to allocate the economy's scarce resources and to communicate and coordinate the decisions made by consumers, firms, and resource suppliers.
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| Opportunity cost | The amount of other products that must be forgone or sacrificed to produce a unit of a product.
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| Production possibilities curve | A curve that shows the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.
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| Production possibilities table | A table showing the different combinations of two products that can be produced with a specific set of resources in a full-employment, full-production economy.
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| Productive efficiency | The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and at which marginal product per dollar's worth of input is the same for all inputs.
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| Product market | A market in which products are sold by firms and bought by households.
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| Resource market | A market in which households sell and firms buy resources or the services of resources.
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| Utility | The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).
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2002 McGraw-Hill Higher Education