Definitions

Scarcity-The basic economic problem which arises from people having unlimited wants while there are and always will be limited resources. Because of scarcity, various economic decisions must be made to allocate resources efficiently.


Opportunity Cost-The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

Capital Goods-Goods that are themselves utilized in the production of other goods rather than being sold to consumers

Socialism-a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.

Capitalism-An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

Adam Smith-Was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment

Macroeconomic-the branch of economics dealing with the broad and general aspects of an economy, as the relationship between the income and investments of a country as a whole.