Basic Economics Terms

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Economics

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The study of how individuals and societies allocate limited resources to satisfy unlimited wants.

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Scarcity

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The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

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Opportunity Cost

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The loss of potential gain from other alternatives when one alternative is chosen.

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Incentives

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Factors that motivate individuals and firms to make decisions in their best interest.

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Marginal Cost

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The cost of producing one additional unit of a good.

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Macroeconomics

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The branch of economics that studies the behavior and performance of an economy as a whole.

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Microeconomics

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The branch of economics that studies individual agents and markets, like households and firms.

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Production Possibility Frontier (PPF)

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A curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors.

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Trade-offs

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The concept of giving up one thing in return for gaining another.

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Positive Statement

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A statement that can be tested and validated; it describes 'what is'.