Economy 1 Flashcards
Need
Something essential to survive
Want
Something that we desire but that is not necessarily essential to survive
Goods
Physical objects that someone produces
Services
actions or activities that one person performs for another
Scarcity
Limited amounts of goods/services are available to meet unlimited wants
Economics
The study of how people seek to satisfy their needs and wants by making choices
Shortage
when consumers want more of a good/service than a producer is willing to make available at a particular price
Entrepreneur
Are people who decide how to combine resources to create new goods and services
Factors of production
The resources used to make all goods and services
Land
All natural resources (everything that can be found in the nature) used to produce goods and services
Labor
The effort people devote to task for which they are paid.
Capital
Refers to any human made resource that is used to produce other goods
Physical capital
Human made objects, (machines, tools, equipment)
Human Capital
The manufacturing, education, knowledge, skills and experience workers gain
Trade off
giving up the benefit in order to gain another
Opportunity cost
the most desirable alternative somebody gives up as the result of a decision
thinking at the margin
analyzing how much or less to do
Cost/benefit analysis
analyzing the pros and cons of all the options of a decision
Marginal cost
the extra cost of adding one unit
Marginal benefits
the extra benefit of adding the same unit
Production Possibilities curve
Is a graph that shows alternative ways to use an economy’s productive services
Production possibilities frontier
shows different ways that a country could use their resources to produce both products and services
efficiency
Is the use of resources in such a way as to maximize the output of goods and services
Underutilization
Any point INSIDE the production possibilities frontier
Law of creasing costs
States that the shift of making on product to another require more resources therefore the opportunity cost increases
