Chapter 1

2. The branch of economics that deals with facts and direct observation of the world; also called positive economics.
3. The branch of economics that deals with value judgements about economic subjects rather than facts and observations; also called policy economics.
6. A productive resource such as land, labour, or capital used to produce an output.
7. A Greek word meaning “household” or “estate” which historically was the first subject of economics analysis.
12. Sciences, such as economics, history, and sociology, that study some aspect of human behaviour.
14. The cost of producing one item, A, expressed in terms of the numbers of another item, B, which must be given up in order to produce A (i.e., A’s opportunity cost).
16. A mistaken belief that what occurs before some event is logically the cause of it; also called cause-and-effect fallacy.
17. A self-sustaining system in which many independent transactions in a society create distinct flows of money and products.
18. The curve on a production possibilities graph representing the maximum number of two items that can be produced with a given amount of resources.
19. The increase in the relative cost of producing more of item A, measured by the numbers of another item, B, that could be produced with the same resources.

1. The eventual decline in the rate of extra outputs produced that occurs when one input used in production of the output is held constant and the others are increased.
4. The increase in the rate of extra outputs produced when all inputs used in production are increased and no inputs are held constant.
5. The sum of all that is lost from taking one course of action over another or of producing one item measured in terms of another that could have been produced with the same resource.
8. A mistaken belief that what is good for an individual is automatically good for everyone, or what is good for everyone is good for the individual.
9. A mistaken belief, based on oversimplification, that a particular event has one cause rather than several.
10. The sacrifice of one resource or production choice for another.
11. A hypothesis that has been proven false but is still accepted by many people because it appears to be true.
13. The products produced by using resources or inputs such as land, labour, or capital.
15. The study of the way society makes decisions about the use of scarce resources.