(See related pages)
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| barter | The exchange of one good or service for another good or service. (See page(s) p. 39) |
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| circular flow diagram | 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. (See page(s) p. 50) |
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| command system | An economic system in which most property resources are owned by the government and the economic decisions are made by a central government body. (See page(s) p. 35) |
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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. (See page(s) p. 37) |
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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. (See page(s) p. 41) |
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| creative destruction | The hypothesis that the creation of new products and production methods simultaneously destroys the market power of firms that are wedded to existing products and older ways of doing business. (See page(s) p. 44) |
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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. (See page(s) p. 39) |
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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. (See page(s) p. 41) |
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| economic system | A particular set of institutional arrangements and a coordinating mechanism for producing goods and services. (See page(s) p. 35) |
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| externalities | Benefits or costs from production or consumption accruing without compensation to non-buyers and non-sellers of the product (see negative externality and positive externality). (See page(s) p. 47) |
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| factor market | A market in which households sell and firms buy factors of production. (See page(s) p. 50) |
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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. (See page(s) p. 48) |
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| freedom of choice | The freedom of owners of property resources to employ or dispose of them as they see fit, and of consumers to spend their incomes in a manner that they think is appropriate. (See page(s) p. 36) |
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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. (See page(s) p. 36) |
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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. (See page(s) p. 45) |
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| market | Any institution or mechanism that brings together buyers and sellers of particular goods, services, or resources for the purpose of exchange. (See page(s) p. 38) |
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| market failure | The inability of markets to bring about the allocation of resources that best satisfies the wants of society. (See page(s) p. 46) |
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| market system | An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities. (See page(s) p. 35) |
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| medium of exchange | Items sellers generally accept and buyers generally use to pay for a good or service. (See page(s) p. 39) |
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| money | Any item that is generally acceptable to sellers in exchange for goods and services. (See page(s) p. 40) |
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| negative externalities | 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. An external cost or a spillover cost. (See page(s) p. 47) |
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| positive externalities | A benefits 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. An external benefit or spillover benefit. (See page(s) p. 47) |
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| private goods | A good or service that is individually consumed and that can be profitably provided by privately owned firms because they can exclude nonpayers from receiving the benefits. (See page(s) p. 48) |
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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. (See page(s) p. 36) |
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| product market | A market in which products are sold by firms and bought by households. (See page(s) p. 50) |
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| public goods | A good or service that can be simultaneously consumed by everyone, and from which no one can be excluded, even if they don't pay for it. (See page(s) p. 48) |
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| self-interest | That which each firm, property owner, worker, and consumer believes is best for itself. (See page(s) p. 37) |
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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. (See page(s) p. 39) |