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Economics

Chaper 1-3 vocab

Question	Answer
Need	something essential for survival
Want	something desire but that is not necessary for survival
Goods	the physical objects that someone produces
Services	the actions or activities that one person performs for another
Scarcity	the principle that limited amounts of goods and services are available to meet unlimited wants
Economics	the study of how people seek to satisfy their needs and wants by making choices
Shortage	a situation in which consumers want more of a good or service than producers are willing to make available at a particular price
Entrepreneur	a person who decides how to combine resources to create goods and services
Factors of production	the resources that are used to make goods and services
Land	all natural resources used to produce goods and services
Labor	the effort people devote to tasks for which they are paid
Capital	any human-made resource that is used to produce other goods and services
Physical capital	human-made objects used to create other goods and services
Human capital	the knowledge and skills a worker gains through education and experience
Trade-off	the act of giving up one benefit in order to gain another, gather benefit
"Guns or butter"	a phrase expressing the idea that a country that describes to produce more military goods ("guns") has fewer resources to produce consumer goods ("butter") and vice versa
Opportunity cost	the most desirable alternative given up as the result of a decision
Thinking at the margin	the process of deciding whether to do or use one additional unit of some resource
Cost/benefit analysis	a decision-making process in which you compare what you will sacrifice and gain by a specific action
Marginal cost	the extra cost of adding one unit
Marginal benefit	the extra benefit of adding one unit
Production possibilities curve	a graph that shows alternative ways to use an economy's productive resources
Production possibilities frontier	a line on a production possibilities curve that shows the maximum possible output an economy can produce
Efficiency	the use of resources in such a way to maximize the output of goods and services
Underutilization	the use of fewer resources than the economy is capable of using
Law of increasing costs	an economic principle states that as production shifts from making one item to another, more and more resources are needed to increase production of the second item
Economic system	the structure of methods and principles that a society uses to produce and distribute goods and services
Factor payment	the income of people receive in return for supplying factors of production
Profit	the amount of money a business receives in excess of the expenses
Safety net	a set of government programs that protect people who face unfavorable economic conditions
Standard of living	level of economic prosperity
Innovation	the process of bringing new methods, products, or ideas into use
Traditional economy	an economic system that relies on habit, custom, or ritual to decide the three key economic questions
Market	any arrangement that allows buyers and sellers to exchange things
Specialization	the concentration of the productive efforts of individuals and businesses of a limited number of activities
Free market economy	an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
Household	a person or group of people living in a single residence
Firm	an organization that uses resources to produce a product or service, which it then sells
Factor market	the arena of exchange in which firms purchase the factors of production from households
Product market	the arena of exchange in which households purchase goods and services from firms
Self-interest	an individual's own personal gain
Incentive	the hope of reward or fear of penalty that encourages a person to behave in a certain way
Competition	the struggle among producers for the dollars of consumers
Invisible hand	a term coined by Adam Smith to decide the self-regulating nature of the marketplace
Consumer sovereignty	the power of consumers to decide what gets produced
Centrally planned economy	an economic system in which the government makes all decisions on the three key economic questions
Command economy	another name for a centrally planned economy
Socialism	a range of economic and political systems based on the belief that wealth should be evenly throughout society
Communism	a political system in which the government owns and controls all resources and means of production and makes all economic decisions
Authoritarian	describes a form of government that limits individual freedoms and require strict obedience from their citizens
Laissez faire	the doctrine that government generally should not intervene in the marketplace
Private property	property that is owned by individuals or companies and not by the government or the people as a whole
Mixed economy	a market-based economic system in which the government is involved to some extent
Economic transition	a period of change in which a nation moves from one economic's system to another
Privatization	the process of selling business or services operated by the government to individual investors, and then allowing them to compare in the marketplace
Free enterprise system	an economic system characterized by individual or corporate ownership of capital goods
Profit motive	the incentive that drives individuals and business owners to improve their material well-being
Open opportunity	the principle that anyone can complete in the marketplace
Legal equality	the principle that everyone has the same legal rights
Private property rights	the principle that people have the right to control their possessions and use them as they wish
Free contract	the principle that people may decide what agreements they want to enter into
Voluntary exchange	the principle that people may decide what, when, and how they want to buy and sell
Interest group	a private organization that tries to persuade public officials to act in ways that benefit its members
Patriotism	love of one's country
Eminent domain	a right of a government to take private property for public use
Public interest	the concerns of society as a whole
Public disclosure laws	laws requiring companies to provide information about their products or services
Macroeconomics	the study of economic behavior and decision-making in a nation's whole economy
Microeconomics	the study of the economic behavior and decision-making in small units, such as households and firms
Gross domestic product	the total value of all final goods and services produced in a country in a given year
Business cycle	a period of macroeconomic expansion, or growth, followed by one of contraction, or decline
Referendums	a proposed law submitted directly to the public
Obsolescence	situation in which older products and processes become out-of-date
Patent	a government license that gives the inventor of a new product the exclusive right to produce and sell it
Copyright	a government license that grants an author exclusive rights to publish and sell creative works
Work ethic	a commitment to the value of work
Public good	a shared good or service for which it would be inefficient or impractical to make consumers pay individually and to exclude those who did not pay
Public sector	the part of the economy that involves the transactions of the government
Private sector	the part of the economy that involves the transactions of individuals and businesses
Infrastructure	the basic facilities that are necessary for a society to function and grow
Free rider	someone who would not be willing to pay for a certain good or service but would get the benefits of it anyway if it were provided as a public good
Market failure	a situation in which the free market, operating on its own, does not distribute resources efficiently
Externality	an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
Poverty threshold	an income level below that which is needed to support families or households
Welfare	government aid to the poor
Cash transfers	direct payments of money by the government to poor, disabled, or retired people
In-kind benefits	goods and services provided for free or at greatly reduced prices
Grant	a financial award given by a government agency to a private individual or group in order to carry out a specific task

Created by: VKimbrell718

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