econ terms

Question 1

scarcity

Answer 1

The fundamental economic problem that arises because resources are limited while wants are unlimited. For example; if you have $10 you have to choose between buying a bagel or a Starbucks

Question 2

Economics

Answer 2

the social science that studies how individuals, businesses, and societies make choices to cope with scarcity and the incentives that influence and reconcile these choices

Question 3

Microeconomics

Answer 3

Focuses on the choices made by individuals and businesses and the influences on those choices. Ex: how a tax on e-commerce affects Amazon’s pricing

Question 4

Macroeconomics

Answer 4

Studies the performance of national and global economics. Example: the impact of interest rates on national unemployment rates

Question 5

Opportunity cost

Answer 5

the highest-valued alternative that must be forgone when a choice is made. Choosing to spend time watching a movie rather than studying for an exam means the opportunity cost is the study time forgone

Question 6

Marginal benefit

Answer 6

the additional satisfaction or utility that a person receives from consuming an additional unit of good or service Ex. the extra enjoyment from eating one more slice of pizza

Question 7

Marginal cost

Answer 7

the cost of producing one more unit of a good or service. For instance, the additional cost of baking one more loaf of bread

Question 8

rational choice

Answer 8

a decision-making process that compares marginal benefits and the marginal cost of action. Choosing to buy a textbook for a class because the benefit (knowledge gained) outweighs the cost (price of the book)

Question 9

trade-off

Answer 9

a situation that involves losing one quality or aspect of something in return for gaining another quality or aspect. Ex; trading off sleep for more study time to improve grades

Question 10

incentives

Answer 10

rewards or penalties that encourage or discourage certain behaviors. Lowering the price of fruits or vegetables can serve as an incentive for healthier eating habits

Question 11

Capital

Answer 11

resources made and used by people to produce and distribute goods and services; includes buildings, machinery, tools and computers. Ex; machinery used in a factory is considered a capital

Question 12

economic model

Answer 12

a simplified representation of reality used to understand and predict economic events. Ex; a supply and demand graph predicts changes in prices

Question 13

efficient

Answer 13

an allocation of resources that maximizes the production of goods and services. Ex; using the least amount of resources to produce the maximum output

Question 14

entrepreneurship

Answer 14

the willingness to take risks and develop, organize, and manage a business venture in a competitive market that is constantly evolving. Ex; starting a new tech company

Question 15

Factors of production

Answer 15

resources use on the production of goods and services, which include land, labour capital and entrepreneurship. Ex; farming uses land for crops, labor for planting and harvesting, capital like tractors, and entrepreneurship to manage the farm

Question 16

goods and services

Answer 16

the output of production that is valued in the market. Goods are tangible items like cars, services are intangible things like haircuts

Question 17

human capital

Answer 17

the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country. Ex; doctors medical education and training

Question 18

Interest

Answer 18

the cost of borrowing money, typically expressed as an annual percentage of the loan amount. Ex; if you borrow $1,000 at an interest rate of 5%, you would pay $50 in interest per year

Question 19

labor

Answer 19

the human effort used in the production of goods and services. Ex; teachers, construction workers, and doctors all contribute labor to the economy