Economics Chapter 1

26 terms by oceanoyster

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What is economics?

need

something essential for survival

want

something that people 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

the 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, greater benefit

guns or butter

a phrase expressing the idea that a country that decides to produce more military goods has fewer resources to produce consumer goods 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 producing one unit

marginal benefit

the extra benefit of adding one unit

production possibilities curve

a graph that shows alternative ways to use the 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 as to maximize the output of goods and services

underutilization

the use of fewer resources than an economy is capable of using

law of increasing costs

an economic principle which states that as production shifts from making one good or service to another, more and more resources are needed to increase production of the second good or service

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