Unit 1 Flashcards
Economics
The study of how individuals and societies make choices about ways to use scarce resources to fulfill their wants
Scarcity
Condition of not being able to have all of the goods & services one wants because wants exceed what can be made from all available resources at any given time
Factors of Production
Resources of land, labor, capital & entrepreneurship used to produce goods or services
Land
Natural resources and surface land and water
Labor
human effort directed toward producing goods and services
Goods
tangible objects that satisfy people’s wants
Services
actions that can satisfy people’s wants or needs
Capital
previously manufactured goods used to make goods and services
productivity
the amount of output that results from a given level of inputs
entrepreneurship
ability of risk-taking individuals to develop new products and start new businesses in order to make profits
technology
advance in knowledge leading to new and improved goods & services and better ways of producing them
Wants
anything other than what is needed
Needs
things required for basic survival
trade-off
sacrificing one good or service to purchase another
opportunity cost
value of the next best opportunity given up for the alternative chosen
production possibilities curve
graph showing the maximum combination of goods & services that can be produced from a fixed amount of resources in a given period of time
microeconomics
the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms
macroeconomics
the branch of economic theory dealing with the economy as a whole and decision making such as large units or government
economy
the production and distribution of goods & services in a society
economic model
a theory or simplified representation that helps explain and predict economic behavior in the real world
hypothesis
an assumption involving 2 or more variables that must be tested for validity
economic system
way in which a nation uses its resources to satisfy its people’s needs and wants
traditional economy
system in which economic decisions are based off customs and beliefs that have been handed down from generation to generation
market economy
system in which individuals own the factors of production and make Econ decisions through free enterprise while looking out for their own families
market
freely chosen activity between buyers and sellers of goods & services
circular flow of economic activity
economic model that pictures income as flowing continuously between businesses and consumers
mixed economy
system combining characteristics of more than one type of economy
capitalism
economic system in which private individuals own the factors of production
laissez-faire
economic system in which the government minimizes its interferences with the economy
free enterprise system
economic system in which private individuals own the factors of production and decide how to use them within legal limits
profit
money left after all the costs of production – wages, rents, interest, and taxes have been paid
profit incentive
desire to make money that motivates people to produce and sell goods & services
private property
whatever is owned by individuals instead of the government
competition
rivalry among producers or sellers of similar goods & services to win more business
