Vocab Ch 1,2,3 Flashcards
Scarcity
Too few goods and services
to satisfy all wants and
needs.
Economics
The study of how scarce, or limited, resources are used to satisfy unlimited wants and needs; the study of decision making in a world of scarcity.
tradeoffs
Giving up one thing for
something else.
Value Judgment
The relative importance one
assigns to an action or
alternative.
Opportunity Cost
The cost of a purchase or decision measured in terms of a forgone alternative; what was given up to make a purchase or carry out a decision.
Efficiency
Producing a given good or
service at the lowest
possible cost; getting the
most output from resources.
Equity
Justice or fairness in the
distribution of goods and
services.
Resources (Factors of
Production)
Persons and things used to produce goods and services; limited in amount; categorized as labor, capital, land, and entrepreneurship.
Labor
Physical and mental human
effort used to produce goods
and services.
Capital
Items, such as machinery
and equipment, used in the
production of goods and
services.
Land
Productive inputs that
originate in nature, such as
coal and fertile soil.
Entrepreneurship
The function of organizing resources for production and taking the risk of success or failure in a productive enterprise.
Wages
Income return to labor.
Interest
Income return to owners of
capital.
Rent
Income return to owners of
land resources.
Profit
Income return to those
performing the
entrepreneurial function.
Economic Theory
A formal explanation of the
relationship between
economic variables.
Labor
The setting within which
an economic theory is
presented.
Assumptions
Conditions held to be true
within a model.
Econometrics
The use of statistical
techniques to describe the
relationships between
economic variables.
Economic Policy
A guide for a course of
action.
Graph
An illustration showing the relationship between two variables that are measured on the vertical and horizontal axes.
Direct Relationship
Two variables move in the
same direction: when one
increases, so does the
other; graphs as an upwardsloping line.
Inverse Relationship
Two variables move in opposite directions: when one increases, the other decreases; graphs as a downward-sloping line.
Production Possibilities
Table (or Curve)
Gives the various amounts of two goods that an economy can produce with full employment and fixed resources and technology.
Unemployment
Resources available for
production are not being
used.
Economic Growth
An increase in an economy’s
full employment level of
output over time.
Capital Goods
Goods, such as machinery
and equipment, that are
used to produce other goods
and services.
Consumer Goods
Goods, such as food and
household furniture, that are
produced for final buyers.
Macroeconomics
The study of the operation of
the economy as a whole.
Microeconomics
The study of individual
decision making units and
markets within the economy.
Basic Economic
Decisions
The choices that must be made in any society regarding what to produce, how to produce, and to whom production is distributed.
Economic System
The way in which an
economy is organized to
make the basic economic
decisions.
Traditional, or Agrarian,
Economy
An economy that relies
largely on tradition, custom,
or ritual when making the
basic economic decisions.
Barter
The direct exchange of
goods or services for other
goods or services.
Market Economy
An economy in which the basic economic decisions are made by individual buyers and sellers in markets using the language of price.
