Economics, test one

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40 terms · Mr. McHugh

Economics

The study of how we make decisions in a world in which resources are limited but wants are unlimited

Scarcity

Limited resources to meet unlimited wants

Scarce

All goods and services we produce are ______

Shortage

This occurs when produces will not or cannot offer goods or services at the current prices

Needs

Something people require that is necessary for survival

Wants

And item we desire that is not essential to survival

Goods

Physical objects such as shoes and shirts

Services

Actions or activities that one person performs for another

Factors of production

Resources necessary to produce goods and services

Land

Includes all material in nature

Labor

Human effort-Both physical and mental

Capital

Any human-made resource used to produce other resources

Physical capital

A type of capital created for goods/services

Human capital

A type of capital that contains skills/education

Entrepreneurship

Ambitious leaders who decide how to combine land, labor, and capital resources to create new things

Fixed costs

Costs or expenses that are the same no matter how many units of goods are produced

Variable costs

Costs or expenses that change with the number of products produced

Total costs

Fixed costs and variable costs

Thinking at the margin

Deciding whether to use one additional unit of some resource

Marginal costs

The extra or additional cost of producing one additional unit of an output

Marginal revenue/benefit

The extra revenue that results from selling one more unit of an output

Cost-benefit analysis

An economic decision making technique that tells us to choose an action or make a decision when the benefits are greater than the cost

Law of diminishing marginal returns

If a store is open even when there is no business, the amount of money he makes will stay at a flat rate of zero (hypothetically speaking)

Trade off

Alternatives we sacrifice when we make a decision

Guns or butter

A theory that says that if there is a country that produces more military goods, the country has fewer resources to devote to consumer goods

Karl Marx

German who wrote "Communist manifesto" with Friedrich Engels

Proletariat

These classes own little, therefore, they sell labor to capitalists

Bourgeois

Person that owns factories and buys labor

John Keynes

This person developed a theory after the great depression. His ultimate goal was to tell economists and politicians how to get out of and avoid economical crisis'

Keynesian economics

A form of demand-side economics

Demand-side economics

Government spending and tax cuts help an economy by raising demand

Capitalism

Private citizens own and use the factors of production in order to seek a profit

Free enterprise economy

Another term used to describe the American economy

Self interest motives

What is another name for economic freedom

Consumer sovereignty

"Consumer is the king" of the market

Markets

Places where prices of goods and services are determined and exchange takes place

Competition

Struggle between buyers and sellers

Anti-Trust laws

This prevents monopolies

Adam Smith

This Scottish economist and philosopher wrote "The wealth of nations"

Laisse-Fairre

"To let alone"

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