Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| Barter | The exchange of one good or service for another good or service. No money changes hands.
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| Competition | The presence in a market of a large number of independent buyers and sellers competing with one another and the freedom of buyers and sellers to enter and leave the market.
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| Consumer sovereignty | Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumer direction of production through their dollar votes.
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| Creative destruction | The hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies.
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| Derived demand | The demand for a resource that depends on the demand for the products it helps to produce.
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| Division of labour | Dividing the work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers.
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| Dollar votes | The "votes" that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase them in product and resource markets.
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| Exclusion principle | The ability to exclude those who do not pay for a product from receiving its benefits.
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| Firm | An organization that employs resources to produce a good or service for profit and owns and operates one or more plants.
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| Four fundamental economic questions | The four questions that every economy must answer: what to produce, how to produce it, how to divide the total output, and how to ensure economic flexibility.
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| Freedom of choice | The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate.
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| Freedom of enterprise | The freedom of firms to obtain economic resources, to use these resources to produce products of the firm's own choosing, and to sell their products in markets of their choice.
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| Free-rider problem | The inability of potential providers of an economically desirable but indivisible good or service to obtain payment from those who benefit, because the exclusion principle is not applicable.
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| Guiding function of prices | The ability of price changes to bring about changes in the quantities of products and resources demanded and supplied.
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| Household | An economic unit (of one or more persons) that provides the economy with resources and uses the income received to purchase goods and services that satisfy material wants.
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| Invisible hand | The tendency of firms and resource suppliers seeking to further their own self-interests in competitive markets to also promote the interest of society as a whole.
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| Medium of exchange | Items sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.
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| Money | Any item that is generally acceptable to sellers in exchange for goods and services.
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| Private property | The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property.
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| Public good | A good or service that is indivisible and to which the exclusion principle does not apply; a good or service with these characteristics provided by government.
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| Quasi-public good | A good or service to which the exclusion principle could apply, but that has such a large spillover benefit that government sponsors its production to prevent an underallocation of resources.
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| Roundabout production | The construction and use of capital to aid in the production of consumer goods.
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| Self-interest | That which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain.
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| Specialization | The use of the resources of an individual, a firm, a region, or a nation to produce one or a few goods and services.
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| Spillover benefit | A benefit obtained without compensation by third parties from the production or consumption of sellers or buyers. Example: A beekeeper benefits when a neighbouring farmer plants clover.
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| Spillover costs | A cost imposed without compensation on third parties by the production or consumption of sellers or buyers. Example: A manufacturer dumps toxic chemicals into a river, killing the fish sought by sport fishers.
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2002 McGraw-Hill Higher Education