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Chapter 1 terms and things to know - Economics
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Terms in this set (24)
Need
is something like air, food, or shelter that is necessary for survival.
want
is an item that we desire but that is not essential to survival.
Economics
is the study of how people seek to satisfy their needs and wants by making choices.
Goods
are physical objects such as shoes and shirts.
Services
are actions or activities that one person performs for another.
Scarcity
implies limited quantities of resources to meet unlimited wants.
Shortage
occurs when producers will not or cannot offer goods or services at the current prices.
Factors of production
Land, Labor, and Capital
Land
to refer to all natural resources used to produce goods and services.
labor
is the effort that a person devotes to a task for which that person is paid.
Capital
is any human made resource that is used to produce other goods and services.
physical capital
Human made objects used to create other goods and services.
human capital
is knowledge and skills a worker gains through education and experience.
Entrepreneurs
are ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services.
trade offs
are all the alternatives that we give up whenever we choose one course of action over another.
guns or butter
country has too choose too produce more military goods or consumer goods.
opportunity cost
The most desirable alternative given up as the result of a decision.
thinking at the margin
When you think about how much more or less too do.
production possibility curve
(graph) Shows alternative ways to use an economy's productive resources.
production possibilities frontier
a line drawn on a graph that shows the possible combinations of productions that can be made.
efficiency
Using resources in such a way as to maximize the production or output of goods and services.
underutilization
Using fewer resources than the economy is capable of using
cost
is the alternative we give up when we choose one option over the other.
law of increasing costs
States that as production switches from one item to another (for example, from shoes to watermelons), more and more resources are necessary to increase production of the second item (Watermelon). Therefore, the opportunity cost increases.
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