Economics Glossary
Word Definition
Opportunity Cost The next best alternative foregone when a choice is made
Economic goods Goods which are scarce and therefore have an opportunity cost
Free goods Goods that have no opportunity cost such as air
Factors of Production The resources available to produce various goods and services
Goods used to produce other goods and services for consumers (buildings,
Capital
machinery, tools)
Ability to come up with and carry out an idea such as creating a new product and
Enterprise
taking it to market
The market for the factors of production that make others goods and services
Factor Market
such as labour or raw materials
Profit when total income or revenue for a firm is greater than total costs
Production Possibility Indicative of the maximum possible output that is achievable given a fixed set of
Frontier/Boundary/Curve resources and technology in a specific time period
When a firm produces the maximum possible output from inputs into the
Productive Efficiency*
production process
Allocative Efficiency*
A measure of efficiency, measuring the ratio of inputs to outputs, e.g. labour
Productivity
productivity – the output per worker
The skills, abilities, knowledge and motivation of labour, improvements in
Human Capital
human capital raise productivity and can shift the PPB outward
The production of a limited range of goods by an individual factor of production
Specialization or a firm or country, in cooperation with others so that together a complete
range of goods is produced
Statements or opinions that are not testable or cannot be verified and depend
Value Judgements
very much on the views of the individual and the values they hold
Normative statements Opinions that require value judgements to be made
Word Definition
Opportunity Cost The next best alternative foregone when a choice is made
Economic goods Goods which are scarce and therefore have an opportunity cost
Free goods Goods that have no opportunity cost such as air
Factors of Production The resources available to produce various goods and services
Goods used to produce other goods and services for consumers (buildings,
Capital
machinery, tools)
Ability to come up with and carry out an idea such as creating a new product and
Enterprise
taking it to market
The market for the factors of production that make others goods and services
Factor Market
such as labour or raw materials
Profit when total income or revenue for a firm is greater than total costs
Production Possibility Indicative of the maximum possible output that is achievable given a fixed set of
Frontier/Boundary/Curve resources and technology in a specific time period
When a firm produces the maximum possible output from inputs into the
Productive Efficiency*
production process
Allocative Efficiency*
A measure of efficiency, measuring the ratio of inputs to outputs, e.g. labour
Productivity
productivity – the output per worker
The skills, abilities, knowledge and motivation of labour, improvements in
Human Capital
human capital raise productivity and can shift the PPB outward
The production of a limited range of goods by an individual factor of production
Specialization or a firm or country, in cooperation with others so that together a complete
range of goods is produced
Statements or opinions that are not testable or cannot be verified and depend
Value Judgements
very much on the views of the individual and the values they hold
Normative statements Opinions that require value judgements to be made
