ATD Level III
Principles of Economics glossary
Every term this guide defines, A to Z, each with the chapter that teaches it. Open it when a word in a question is unfamiliar, and test yourself on it in the last week: cover the definition and say it in one sentence.
15 terms from the free first chapter
E
- Economic resources
The inputs (land, labour, capital and entrepreneurship) used to produce goods and services, scarce relative to the demands placed on them.
Taught in Foundations of economics
F
- Free market economy
Resource allocation is left to the interaction of demand and supply in markets (see the chapter on demand, supply and pricing), with minimal government intervention.
Taught in Foundations of economics
H
- Human wants
Desires for goods and services that give satisfaction; effectively unlimited, since satisfying one want commonly reveals or creates another.
Taught in Foundations of economics
M
- Macroeconomics
Studies the economy as a whole, national income, inflation, unemployment, growth and the aggregate behaviour of all markets combined (the macroeconomics chapters).
Taught in Foundations of economics
- Microeconomics
Studies the behaviour of individual economic units, households, firms and specific markets, how they make decisions and interact (the microeconomics chapters of this guide).
Taught in Foundations of economics
- Mixed economy
Combines market allocation with government intervention, the system most real-world economies, Kenya included, actually operate under.
Taught in Foundations of economics
N
- Normative economics
Concerned with what ought to be, statements involving a value judgement about what policy should aim for (e.g. 'the minimum wage should be raised').
Taught in Foundations of economics
O
- Opportunity cost
The value of the best alternative forgone when a choice is made, the true economic cost of any decision, not merely its monetary price.
Taught in Foundations of economics
P
- Planned economy
Resource allocation decisions, what, how and for whom to produce, are made centrally by government rather than by market forces.
Taught in Foundations of economics
- Positive economics
Concerned with what is, objective, testable statements about how the economy actually behaves, free of value judgement (e.g. 'a minimum wage above equilibrium causes unemployment').
Taught in Foundations of economics
- Production possibility curves/frontiers
A curve showing the maximum combinations of two goods an economy can produce with its existing resources and technology, fully employed; a point inside the curve shows unused capacity, a point outside is currently unattainable, and points along the curve itself show the opportunity cost of shifting production from one good to the other.
Taught in Foundations of economics
S
- Scarcity and choice
Scarcity is the basic economic condition that resources are insufficient to satisfy every want; because of it, every economic agent must choose which wants to satisfy and which to leave unmet.
Taught in Foundations of economics
- Scientific method / economics as a social science
Economics builds and tests theories through observation and logical deduction, as the natural sciences do, but with the added difficulty that human behaviour, the subject matter, cannot be controlled in a laboratory the way physical phenomena can.
Taught in Foundations of economics
W
- Wealth
The stock of resources, assets and property owned by an individual, firm or nation at a point in time.
Taught in Foundations of economics
- Welfare
The overall well-being of individuals or society, of which wealth is only one contributor; economics is ultimately concerned with welfare, not wealth for its own sake.
Taught in Foundations of economics
The full glossary adds every term from the other 10 chapters, A to Z, each with the chapter that teaches it.