Chapter One Vocabulary: What is Economics?

Question 1

need

Answer 1

something like air, food, or shelter that is necessary for survival

Question 2

want

Answer 2

an item that we desire but that is not essential to survival

Question 3

economics

Answer 3

the study of how people seek to satisfy their needs and wants by making choices

Question 4

goods

Answer 4

physical objects such as clothes or shoes

Question 5

services

Answer 5

actions or activities that one person performs for another

Question 6

scarcity

Answer 6

limited quantitites of resources to meet unlimited wants

Question 7

shortage

Answer 7

a situation in which a good or service is unavailable

Question 8

factors of production

Answer 8

land, labor, and capital; the three groups of resources that are used to make all goods and services

Question 9

land

Answer 9

natural resources that are used to make goods and services

Question 10

labor

Answer 10

the effort that people devote to a task for which they are paid

Question 11

capital

Answer 11

any human made resource that is used to create other goods and services

Question 12

physical capital

Answer 12

all human-made goods that are used to produce other goods and services; tools and buildings

Question 13

human capital

Answer 13

the skills and knowledge gained by a worker through education and experience

Question 14

entrepreneur

Answer 14

ambitious leader who combines land, labor, and capital to create and market new goods and services

Question 15

trade-off

Answer 15

an alternative that we sacriice when we make a decision

Question 16

guns or butter

Answer 16

a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods

Question 17

opportunity cost

Answer 17

the most desirable alternative given up as the result of a decision

Question 18

thinking at the margin

Answer 18

deciding whether to do or use one additional unit of some resource

Question 19

production possibilities curve

Answer 19

a graph that shows alternative ways to use an economy’s resource

Question 20

production possibilities fronteir

Answer 20

the line on a production possibilities graph that shows the maximum possible output

Question 21

efficiency

Answer 21

using resources in such a way as to maximize the production of goods and services

Question 22

underutilization

Answer 22

using fewer resources than an economy is capable of using

Question 23

cost

Answer 23

to an economist, the alternative that is given up because of a decision

Question 24

law of increasing costs

Answer 24

law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases