Key Terms Flashcards
Define Needs.
Something that is necessary for survival such as food, shelter, warmth or clothing.
Define Wants.
Something that is desirable such as fashionable clothing but not necessary for human survival.
Define Economic Welfare.
The economic wellbeing of an individual, a group in society or an economy.
Define Economic Good.
Goods which are scarce because their use has an opportunity cost.
Define a Free Good.
Goods that are abundantly available and can be used over and over again.
They are not scarce and have zero opportunity cost.
Define Economy.
A system that tries to provide solutions for how to allocate resources among unlimited wants in order to achieve the greatest benefit for the people in an economy.
What is a Free Market?
Where markets allocate resources through the price mechanism.
Eg. USA
What is a Command Economy?
Where the resources are owned by the government and allocated to its own view of people’s wants and needs.
Eg. Communist Russia.
What is a Mixed Economy?
Where some resources are owned by the government and some are owned by the private sector.
Eg. United Kingdom
Define Opportunity Cost.
The benefit foregone of the next best alternative to the decision being made.
How is Opportunity Cost calculated?
What you are sacrificing/What you are gaining
Define the basic economic problem.
How to allocate scarce resources between competing uses to achieve maximum satisfaction for the people.
People have limited needs but unlimited wants.
