Economics: Chapter 1 Sections 1-3
Terms in this set (32)
Study of how people seek to satisfy their needs and wants by making choices.
The principle that limited amounts of goods and services are available to meet unlimited wants (greater wants than what is available).
Forces people to decide what is most important to us.
Ex. A concert that is sold out.
Something essential for survival such as food or clothing.
Something that people desire but that is not necessary for survival.
Physical objects that people businesses or governments buy.
Process of turning materials into products we use.
Actions or activities that one person performs for another for a fee.
Anything that people use to make thing or do work.
A situation in which people want more of a good or service than producers are willing to supply at a particular price.
Can be renewed or replaced.
3 requirements to be considered scarce
1. must be something we really desire
2. must have more than one use
3. must be something that exists only in limited amounts
A person who decides how to combine resources to create goods and services.
Factors of production
Resources that are used to make goods and services.
All natural resources used to produce goods and services.
The effort people devote to tasks for which they are paid.
Includes the people who use brainpower to design the building.
Any human-made resource used to produce goods and services.
what are the 2 types of capital
The human-made objects used to create other goods and services.
Ex. buildings, machinery, tools, equipment.
The knowledge and skills gained from education and experience.
Ex. working with a computer, playing an instrument, reading
3 benefits of using capital
1. extra time
2. more knowledge
3. more productivity
economic resources are scarce because
the resources used to produce them are scarce
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 (guns) has fewer resources to produce consumer goods (butter) and vice versa.
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.
The cost of producing one more unit of a good.
The extra benefit of adding one unit.
Production Possibilities Curve
A graph that shows the alternative ways to use an economy's productive resources.
Production Possibility Frontier
A line on a production possibilities curve that shows the maximum possible output an economy can produce.
Reflects a trade-off
The use of resources in such a way as to maximize the output of goods and services.
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.