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Economics test chapter 1,2 & 3

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Need
something like air, food, 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
scarcity
limited quantities of resorces to meed unlimited wants
shortage
a situation in which good or services in unavaliable
Factors of production
land labor and capital
Land
Natural resources that are used to make all good 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 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
entrepreneur
ambitious leader who combines land labor and capital to create and market new goods and services
Guns or butter
government choices between making military goods and consumer goods
Trade off
an alternative that we sacrifice when we make a decision
opportunity cost
the most desirable alternative given up as the result of a decision.
think at 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 resources.
production possibilities frontier
a graph that shows maximum possiablites output.
efficiency
using resources in such a way as to maximize the production of good services
cost
to an economist the alternative that is given up because of a decision
law of increasing cost
law that states that as we shift factors of production from making one good or service to another the cost of producing the second item increasing
economic system
the method used by a society to produce and distribute good and services
factor payments
the income people receiving for supplying factors of production
patriotism
the love of ones country
safety net
government programs that protect people experiencing un favorable economic conditions
standard living
level of economic prosperity
traditional economy
economic system that relies on habit custom or rural to decide questions of productions
market economy
economic system in which decisions on productions and consumption
centrally planned economy
economic system in which central government makes decision
command economies
central authority is in command
mixed economy
market based economy system with limited government involvement
Market
an arrangement that allows buyers and sellers to exchange things
specialization
the concentration of the productive efforts of individuals and firms on a limited number of activities
firm
and organization that uses resources to produce a product which it then sells
factor market
market which firms purchase the factors of production from household
profit
the financial gain made in transaction
product market
the market in which households purchase the goods and services that firms produce
incentive
an expectation that encourages people to behave in a certain way
consumer sovereignty
the power of consumers to decide what gets produces.
socialism
a social and political philosophy based on the belief that democratic means should use to evenly distribute wealth throughout a society
communism
political system characterized by a planned economy with all economic and political power resting in the hands of the central government
collectives
large farm leased from the state to groups of peasant farmers
heavy industry
industry that requires a large capital investment and that produces items used in other industries
laissez faire
doctrine that states that government generally should not intervene in that marketplace
free enterprise
economic system characterized by private or corporate ownership of capital goods
continuum
a range with no clear divisions
transition
period of change in which an economy moves away from a centrally planned economy toward a market based system
privatize
to sell state-run firms to individuals
profit motive
the force that encourages people and organizations to improve their material well-being
open opportunity
the concept that everyone can compete in the market place
legal equality
the giving everyone the same legal rights
private property rights
the concept that people have the right to control their possesses they wish
free contract
the concept that people may decide what agreements they want to enter into
volunteer exchange
the concept that people may decide what and when they want to buy and sell
competition
rivaly among sellers to attract customers while lowering costs
intrest groups
a private organization that tries to persuade public officials to act or vote according to group members interests
public disclosure law
laws requiring to provide full information about their products
public intrest
concerns of the public
macroeconomics
the study of the behavior and decision making of entire economies
microeconomics
study of behavior and decision making of small units. such as individuals
gross domestic product
the total value of all final goods and services products in a partially economy
business cycle
a period of macroeconomics expansion followed by a period on concentration
work ethic
a commitment to the value and work of purposeful activity
public goods
a shared goods or services for which it would take be inficent or impractical to make consumers 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
free rider
someone who will not choose to pay for a certain amount good and services but would get benefits
externality
an economic side effect of a good services that generates benefits or cost to someone other that the person deciding
poverty threshold
an income level below that which is needed to support families or households
welfare
government aid poor
cash transfers
direct payments of money to eligible poor people
in-kind benefits
goods and services provided for free or at greatly reduced prices
different types of economy
1. Capitalistic/"Freemarket"
2. Socialistic
3. Mixed Economy
types of capital
1) Subordinate Notes and Debentures
2) Preferred Stock
3) Common Equity Capital/Total Assets
safety net programs
to protect the poor, unemployed, and children