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Efficiency
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In economics "efficiency" means " allocate efficiency" An efficient economy is one that produces what people want at the least possible cost.
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stability
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A condition in which national output is growing steadily, with low inflation and full employment of resources.
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Economic growth
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an increase in the total output of an economy
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equity
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fairness
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Economics
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is the study how individuals and societies choose to use the scarce resources that nature and previous generations have provided
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Scarce
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limited
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opportunity cost
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The best alternative that we forgo, or give up, when we make a choice or decision.
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Marginalism
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the process of analyzing the additional or instrumental costs or benefits arising from a choice
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Efficient market
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a market in which profit opportunities are eliminated almost instantaneously
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Industrial Revolution
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The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.
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Macroeconomics
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examines the economic behavior of aggregates income employment output and so on a national scale
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Mircoeconomics
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examines the functioning of individual industries and the behavior of individual decision-making units that is, firms and households
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postive economics
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an approach to economics that seeks to understand behavior and the operation of systems without making judgments. it describes what exists and how it works
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normative economics
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An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Also called policy economics.
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Ockham's Razor
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the principle that irrelevant detail should be cut away
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Ceteris Paribus or all else equal
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A device used to analyze the relationship between two variables while the values of other variables are held unchanged.
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post hoc ergo propter hoc
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literally "after this(in time) therefore because of this;" A common error made in thinking about causation "if event A happens before event B, it is not necessarily true that A caused B.
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empirical economics
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the collection and use of data to test economic theories
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Model
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A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables.
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Variable
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a measure that can change from time to time or from observation to observation
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Time series graph
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Time is measured along the horizontal scale and being graphed is measured along the vertical scale
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positive relationship
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A relationship between two variables, X and Y, in which a decrease in X is associated with a decrease in Y, and an increase in X is associated with an increase in Y.
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negative relationship
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A relationship between two variables, X and Y, in which a decrease in X is associated with an increase in Y and an increase in X is associated with a decrease in Y.
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Graph
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two- dimensional representation of a set of numbers or data
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x-axis
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the horizontal line against which a variable is plotted
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y-axis
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the vertical line against which a variable is plotted
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Orgin
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the point at which the horizontal and vertical axes intersect
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y-intercept
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A point at which a graph intersects the y-axis.
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x-intercept
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the point at which a graph intersects the x-axis
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Factors of Production or Simply Factors
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Basic Resources available to a society
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Capital
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things that are produced and then used in the production of other goods and services
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Inputs
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resources or factors of production
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Production Possibility Frontier(ppf)
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a graph that shows all the combinations of goods and services that can be produced if all of society's resources are used efficiently
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Marginal rate of transformation (MRT)
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The slope of the production possibility frontier (ppf).
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Economic growth
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An increase in the total output of an economy. Growth occurs when a society acquires new resources or when it learns to produce more using existing resources.
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Command economy
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An economy in which a central government wither directly or indirectly sets output targets incomes, and prices.
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laissez-faire economy
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An economy in which individual people and firms pursue their own self-interest without any central direction or regulation
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Market
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The institution through which buyers and sellers interact and engage in exchange
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opportunity cost
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The best alternative that we forgo, or give up, when we make a choice or decision.
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investment
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the process of using resources to produce new capital
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Consumer goods
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goods produced for present consumption
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absolute advantage
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a producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources
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Theory of comparative Advantage
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David Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers
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Outputs
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goods and services of value to households
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Production
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Process that transforms scarce resources into useful good and services
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comparative advantage
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A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost.
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consumer sovereignty
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Consumers ultimately dictate what will be produced( or not be produced) by choosing what to purchase ( and what not to purchase)
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