Homo economicus - everyone wants more material wealth. Creative destruction - out with the old and in with the new. Factors of production - items used to produce goods and service. Opportunity cost - value of the next best alternative. Budget constraint - the set of possible choices. Cost effective policy - policy that minimises the cost of obtaining a given desirable outcome. Cost benefit analysis - an analysis of all the benefits of a choice as well as the opportunity costs involved in making that choice. Effective marginal tax rate - increase in taxes and the decrease in side payments (benefits) Progressive tax - when the average tax increases with pre-tax revenue, the tax is progressive. Regressive tax - when average tax decreases with pre-tax revenue. Poverty trap - when someone with few skills earns more out of work than at work.