Chapter 2

3. Increase in the capacity of an economy to produce goods and services.
9. Graph showing possible production combinations given resources and technology.
10. Resources that can be bought and sold in the market.
11. Study of economy-wide phenomena like inflation and unemployment.
13. Prescribe how the world should be.
14. Describe the world as it is.

1. Study of how households and firms make decisions.
2. Systematic approach used by economists to explain the world.
4. Simplify the complex world to aid understanding.
5. Highly simplified representations of reality used in economic studies.
6. The fundamental economic problem of limited resources relative to human wants.
7. Maximizing outputs with given inputs, avoiding waste.
8. Visual model illustrating the flow of money in an economy.
12. Sacrificing one thing for another.