association as causation  the mistaken assumption that because two events seem to occur together, one causes the other
assumptions  statements that are taken for granted without justification
capital  products such as machinery and equipment that are used in production
ceteris paribus  other things being equal, or everything else held constant
economic bad  any item for which we would pay to have less
economic good  any good that is scarce
factors of production  goods used to produce other goods
fallacy of composition  the mistaken assumption that what applies in the case of one applies to the case of many
free good  a good for which there is no scarcity
inputs  goods used to produce other goods
labor  the physical and intellectual services of people, including the training, education, and abilities of the individuals in a society
land  all the natural resources, such as minerals, timber, and water, as well as the land itself
macroeconomics  the study of the economy as a whole
microeconomics  the study of economics at the level of the individual
model  see theory
normative analysis  analysis of what ought to be
positive analysis  analysis of what is
rational self-interest  the term economists use to describe how people make choices
resources  goods used to produce other goods, i.e., land, labor, capital, and entrepreneurial ability
scarcity  the shortage that exists when less of something is available than is wanted at a zero price
scientific method  a manner of analyzing issues that involves five steps: recognition of the problem, assumptions, model building, predictions, and tests of the model
tests  trials or measurements used to determine whether a theory is consistent with the facts
theory (or model)   a simplified, logical story based on positive analysis that is used to explain an event
unlimited wants  boundless desires for goods and services