Chapter 1 Economics

Utility

Ability or capacity of a good or service to be useful and useful and give satisfaction to someone

Trade-offs

Alternatives that must be given when one is chosen rather than the other.

Paradox of Value

Apparent contradiction between the high value of non essentials and low value of essentials.

Division of Labor

Assignment of tasks so that each worker performed by different workers; same as specialization

Specialization

Assignment of tasks so that each worker performs fewer functions more frequently; same as division of labor.

Need

Basic requirement for survival; includes food clothing and/or shelter.

Opportunity Cost

Cost of the next best alternative use of money,time, or resources when one choice is made rather than the other.

Productivity

Degree to which productive resources used efficiently; normally refers to labor, but can apply to all factors of production.

Production Possibilities Frontier

Diagram representing maximum combinations of goods and for services an economy can produce when all productive resources are fully employed.

Economic Interdependence

Economic activities in one part of the country or world affect what happens elsewhere.

Scarcity

Fundamental economic problem facing all societies that results from a combination of scarce resources and people's virtually unlimited wants.

Gross Domestic Production

GDP, after adjustments for inflation; also called GDP in constant (chained) dollars; same as real GDP.

Consumer Good

Good intended for final use by consumers rather than businesses.

Economic Product

Good or service that is useful, relatively scarce, and transferable to others.

Free-enterprise Economy

Market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention; same as private enterprise economy.

Product Market

Market where goods and services are offered for sale.

Factor Market

Market where productive resources are bought and sold.

Land

Natural resources or "gifts of nature" not created by human effort; one of four of production

Labor

People with all their abilities and efforts; one of four factors production, does not include the entrepreneur.

Production

Process of creating goods and services with the combined use of land, capital, labor, and entrepreneurship.

Factors of Production

Productive resources that make up the four categories of land, categories of land, capital, labor, and entrepreneurship.

Standard of Living

Quality of life based on ownership of necessities are luxuries that make life easier.

Entreprenuer

Risk-taking individual in search of profits; one of four factors of production.

Economics

Social science dealing with the study of how people satisfy seemingly unlimited and competing wants and with the careful use of scarce resources.

Human Capital

Sum of people's skills, abilities, health, and motivation,

Wealth

Sum of tangible economic goods that are scarce, useful, and transferable from one to another; excludes services.

Economic Growth

Sustained period during which a nation's total output of goods and services increases.

Good

Tangible economic product that is useful, transferable to others; used to satisfy wants and needs

Capital Good

Tool, equipment, or other manufactured good used to produce other goods and services, a factor of production.

Capital

Tools, equipment, and factories used in the production of goods and services; one of four factors of production.

Want

Way of expressing or communicating a need; a broader classifcation than needs.

Cost Benefit Analysis

Why of thinking that compares the cost of an action to its benefits.

Value

Worth of a good or service as determined by the market.