IB Economics 1. Introduction to Economics Key Definitions

An increase in an economy's real output (real GDP) that uses up spare capacity, shown as a movement from a point inside the PPC toward the curve.

A relatively recent field of economics founded on the notion that human behaviour is significantly more complex than the traditional assumptions of rational consumer choice.

Human-made factors of production used to produce goods and services.

A Latin expression that indicates all other variables besides those being considered are assumed to be unchanging.

The dynamic nature of economic activity, where prices, employment, output, and policies evolve over time in response to internal and external influences.

The act of selecting among alternatives because of the scarcity of resources.

An income flow in an economy where the value of the output produced is equivalent the total income earned from its production, which is also equivalent to the expenditures spent on purchasing that output.

An increase in a country's real output (real GDP) over a period time.

The level of prosperity, economic satisfaction, and standard of living experienced by members of an economy.

The study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants.

Using scarce resources in the best possible way to avoid welfare loss.

The unique human skills held by some individuals, including the ability to innovate, take business risks, and pursue new opportunities for running a business.

The even distribution of resources, opportunities, and outcomes among individuals or groups within a society

The condition of being fair and just.

All resources or inputs used to produce goods and services.

Investments in financial instruments, or the funds used to purchase financial instruments. A capital factor of production.

When a government alters the resource allocation that markets would have achieved working freely on their own.

Skills, abilities, good health, and knowledge utilized by people to increase their productivity.

The addition of funds into the income flow through investment, government spending, or exports.

The concept that economic decision-makers rely on and interact with one another, because no one can be entirely self-sufficient.

Typically involving government action, it occurs when the government interacts with the workings of markets.

All the physical work and mental skills that humans put into the production of goods and services.

All natural resources on Earth, including farmland and non-farmland. All the natural resources found below and above the ground.

The removal of funds from the income flow, represented by savings, taxes, or imports.