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MVCC ECONOMICS C1 VOCAB Glossary Chapter 1 ceteris paribus holding all other things constant X-axis the horizontal axis on a graph Y-axis the vertical axis on a graph aggregate the total amount—such as the aggregate level of output bads items that we do not desire or want, where less is preferred to more, such as terrorism, smog, or poison oak bar graph visual display showing the comparison of quantities capital the equipment and structures used to produce goods and services causation when one event brings about another event correlation when two events occur together economic goods scarce goods created from scarce resources—goods that are desirable but limited in supply economics the study of choices we make among our many wants and desires given our limited resources efficiency when an economy gets the most out of its scarce resources empirical analysis the use of data to test a hypothesis entrepreneurship the process of combining labor, land, and capital to produce goods and services factor (or input) markets markets in which households sell the use of their inputs (capital, land, labor, and entrepreneurship) to firms fallacy of composition the incorrect view that what is true for the individual is always true for the group goods items we value or desire human capital the productive knowledge and skill people receive from education, on-the-job training, health, and other factors that increase productivity hypothesis a testable proposition intangible goods goods that we cannot reach out and touch, such as friendship and knowledge labor the physical and human effort used in the production of goods and services land the natural resources used in the production of goods and services macroeconomics the study of the whole economy, including the topics of inflation, unemployment, and economic growth market the process of buyers and sellers exchanging goods and services market failure when the economy fails to allocate resources efficiently on its own microeconomics the study of household and firm behavior and how they interact in the marketplace negative relationship when two variables change in opposite directions normative statement a subjective, contestable statement that attempts to describe what should be done pie chart visual display showing the relative size of various quantities that add up to 100 percent positive when two variables change in the same direction relationship positive statement an objective, testable statement that describes what happens and why it happens product markets markets in which households are buyers and firms are sellers of goods and services rational behavior people do the best they can, based on their values and information, under current and anticipated future circumstances resources inputs used to produce goods and services scarcity exists when human wants (material and nonmaterial) exceed available resources services intangible items of value provided to consumers, such as education simple circular flow model an illustration of the continuous flow of goods, services, inputs, and payments between firms and households slope the ratio of rise (change in the Y variable) over run (change in the X variable) tangible goods items we value or desire that we can reach out and touch the economic problem scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value theory a statement or proposition used to explain and predict behavior in the real world time-series graph visual tool to show changes in a variable’s value over time variable something that is measured by a number, such as your height