| Term | Definition |
|---|
| Scarcity | limited quantities of resources to meet unlimited wants |
| Need | something like air, food, or shelter that is necessary for survival |
| Want | an item that we desire but that is not essential to survival |
| Economics | the study of how people seek to satisfy their needs and wants by making choices |
| Goods | physical objects such as clothes or shoes |
| Services | actions or activities that one person performs for another |
| Shortage | a situation in which a good or service in unavailable |
| Factors of Production | land, labor, and capital; the three groups of resource that are used to make all goods and services |
| Land | natural resources that are used to make goods and services |
| Labor | the effort that people devote to a task for which they are paid |
| Capital | any human-made resource that is used to create other goods and services |
| Physical Capital | all human-made goods that are used to produce other goods and services; tools and buildings |
| Human Capital | the skills and knowledge gained by a worker through education and experience |
| Entrepreneurs | ambitious leader who combines land, labor, and capital to create and market new goods and services |
| Trade-off | an alternative that we sacrifice when we make a decision |
| Guns or butter | a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods |
| Opportunity cost | the most desirable alternative given up as the result of a decision |
| Thinking on the margin | deciding whether to do or use one additional unit of some resource |
| Production possibility curve | a graph that shows alternative ways to use an economy's resource |
| Production possibility frontier | the line on a production possibilities graph that shows the maximum possible output |
| Efficiency | using resources in such a way as to maximize the production of goods and services |
| Underutilization | using fewer resources than an economy is capable of using |
| Law of increasing costs | law that states that as we shift factors of productions from making one good or services to another, the cost of producing the second item increases |
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