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Ceteris paribus "Other things equal"; the assumption that factors other than those being considered are

held constant Circular flow model The flow of productive 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 Capital Human-made resources used to produce goods and services Command economy An economic system in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities Direct relationship The relationship between two variables, which change in the same direction, for example, product price and quantity supplied Dependent variable A variable, which changes as consequence of a change in some other variable; the 'effect' or outcome Microeconomics The part of economics concerned which issues and problems that affect the economic behavior of specific units, such as industries, firms, and households Pure capitalism An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities Government transfer The disbursement of money by government for which government receives no currently produced good or service in return Socialism An economic system in which a few basic property resources are publicly-owned but markets and prices are used to direct and coordinate most other economic activities Traditional economy An economic system in which traditions and customs determine how the economy will use its scarce resources Normative economics The part of economics involving value judgments about what the economy should be like Subsidy A payment of funds by a government, firm, or household for which it receives no good or service in return; when made by a government it is a government transfer payment Fallacy of composition Incorrectly reasoning that what is true for the individual is necessarily true for the group Economic growth An outward shift in the production possibilities curve which results from an increase in resource quantity or quality or an improvement in technology; an increase either in real output or in real output per capita

Inverse relationship The relationship between two variables, which change in opposite directions, for example, product price and quantity demanded Macroeconomics economy as a whole The part of economics concerned with problems and issues that impact the

Tradeoffs The sacrifice of some or all of one economic goal, good, or service to achieve some other goal, good, or service Post hoc, ergo Incorrectly reasoning that when one event precedes another the first event must have caused Self-Interest That which each firm, property owner, worker and consumer believes is best for itself and seeks to obtain Production possibilities A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy in which available supplies of resources and technology are fixed Human capital The accumulation of prior investments in education, training, health and other factors which increase productivity Personal distribution of income The manner in which the economy's income is divided among households in different income classes; the percentage received by each quintile of households Factors of production Economic resources: land, capital, labor, and entrepreneurial ability

Private sector The households and business firms of the economy Functional distribution of income The manner in which national income is divided among the functions performed to earn it; the division of national income into wages and salaries, proprietors income, corporate profits, interest, and rent Infrastructure The capital goods usually provided by the public sector for the use of its citizens and firms (for example, highways, bridges, transit systems, waste water treatment facilities, municipal water systems, and airports) Public sector The part of the economy which contains all government entities The variable causing a change in some other variable

Independent variable

Mixed capitalism An economy in which both government and private decisions determine how resources are allocated Positive economics The part of the study of economics that involves analysis of facts or data to establish scientific generalizations about economic behavior

Opportunity cost

The next-best alternative which must be given up whenever a choice is made