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University of Toronto Scarborough
Economics for Management Studies
Kieran Furlong

scarcity the state in which the resources available are insufficient to satisfy people's wants production the boundary between the combinations of goods and services that possibilities frontier can be produced and the combinations that cannot (PPF) economics the social science that studies the choices that we make as we cope with scarcity and the institutions that have evolved to influence and reconcile our choices microeconomics the study of choices that individuals and businesses make, the way those choices interact, and the influence governments exert on them macroeconomics the study of the effects on the national economy and the global economy of the choices that individual, businesses, and governments make goods and services all the objects that people value and produce to satisfy their wants factors of production the resources that businesses use to produce goods and services land all the gifts of nature that we use to produce foods and services labor the work time and work effort that people devote to producing goods and services human capital the knowledge and skill that people obtain from education, on-the-job raining, and work experience capital the tools, equipment, buildings, and other constructions that businesses now use to produce goods and services entrepreneurship the human resource that organizes the other three factors of production: labor, land, and capital. Entrepreneurs come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from their decisions rent the income that land earns wages the income that labor earns interest the income that capital earns profit the income earned by entrepreneurship standard of living the level of consumption that people enjoy, on the average, and is measured by average income per person cost of living the amount of money it takes to buy the goods and services that the average family consumes inflation a rising cost of living -- a process in which the price level is rising and money is losing value deflation a falling cost of living -- a process in which the price level is falling business cycle the periodic but irregular up-and-down movement in production and jobs tradeoff a constraint that involves giving up one thing to get something else big tradeoff the conflict between equity and efficiency output-inflation a tradeoff that arises because a policy action that lowers inflation tradeoff also lowers output and a policy action that boosts output also increases inflation opportunity cost the highest-values alternative that we give op to get something margin when a choice is changed by a small amount or by a little at a time, the choice is made at the margin marginal benefit the benefit that a person receives from consuming one more unit of a good or service. It is measures as the maximum amount that a person is willing to pay for one more unit of the good or service marginal cost the opportunity cost of producing one more unit of a good or service. It is the best alternative forgone, It is calculates as the increase in total cost divided by the increase in output incentive an inducement to take a particular action economic model a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand economic theory a generalization that summarizes what we think we understand about the economic choices that people
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