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Economics Unit 1
basic economic concepts
Terms in this set (42)
the study of how individuals, families, businesses and societies make choices about ways to use scarce resources to fulfill their wants.
needs vs wants
needs are basic survival things one must have to survive such as food, clothing, shelter. Everything else is a want.
the condition of not being able to have all of the goods and services one wants, because wants exceed what can be made from all available resources at any given time.
a temporary lack of a good or service.
factors of production
resources of land, labor, capital, and entrepreneurship used to produce goods and services.
natural resources and surface land and water.
human effort directed toward producing goods and services.
tangible objects that can satisfy people's wants or needs.
actions that can satisfy people's wants or needs.
previously manufactured goods used to make other goods and services.
the amount of output (goods and services) that results from a given level of inputs (land, labor, capital, entrepreneurship).
ability of risk-taking individuals to develop new products and start new businesses in order to make profits.
advances in knowledge leading to new and improved goods and services and better ways of producing them.
sacrificing one good or service to purchase or produce another.
value of the next best alternative given up for the alternative that was chosen.
production possibilities curve
graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments.
the production and distribution of goods and services in a society.
a theory or simplified representation that helps explain and predict economic behaviorin the real world.
an assumption involving two or more variables that must be tested for validity.
way in which a nation uses its resources to satisfy its people's needs and wants.
system in which econmic decisions are based on customs and beliefs that have been handed down from generation to generation.
system in which the government controls the factors of production and makes all decisions about their use.
system in which individuals own the factors or production and make economic decisions through free interaction while looking out for their own and their families' best interests.
freely chosen activity between buyers and sellers of goods and services.
circular flow of economic activity
economic model that pictures income as flowing continuously between businesses and consumers.
system combining characteristics of more than one type of economy.
economic system in which private individuals own the factors of production.
economic system in which the government minimizes its interference with the economy.
free enterprise system
economic system in which individualsown the factors or production and decide how to use them within legal limits; same as capitalism.
moeny left after all the costs of production--wages, rents, interest, and taxes--have been paid.
desire to make money that motivates people to produce and sell goods and services.
whatever is owned by individuals rather than by government.
rivalry among producers or sellers of similar goods and services to win more business.
the right of individuals to start their own businesses, own private property, to make decisions in the marketplace and to pursue other economic choices.
wise use of available resources so that costs do not exceed benefits.
the attempt to balance an economic policy so that everyone benefits fairly.
standard of living
the material well-being of an individual, group, or nation measured by how well their necessities and luxuries are satisfied.
expansion of the economy to produce more goods, jobs, and wealth.
the goal to reduce extreme ups and downs in the material well-being of an individual, group, or nation.
the goal to proect people against risks beyond their control such as on job accidents, natural disasters, business and bank failures.
Recommended textbook explanations
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Economics: Concepts and Choices
Bundle: Principles of Macroeconomics, 6th + Global Economic Watch GEC Resource Center Printed Access Card
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Connect Plus Economics One Semester Online Access for Principles of Macroeconomics
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