Economics Chapter 1

capital

definition: any human-made resource that is used to create other goods or services importance: capital is what help produces the goods and services. Thus, is essential in creating a businesses as it creates products relates to: human and physical capital, land, labor

law of increasing cost

definition: as we shift factors of production from making one good or service to another, the cost of producing the second item increases importance: relates to:

thinking at the margin

definition: deciding whether to do or use one additional unit of some resource importance: helps make more rational decisions = benefit to individual or company relates to:entrepreneur, opportunity cost

factors of production

definition: land, labor, and capital; the three groups of resources workers on a company's payroll importance: The factors of production are the resources that help create an economy. Without land,labor or capital, the nation would not have a running economy or an economy at all. relates to: labor, land, capital

land

definition: natural resources that are used to make goods and services importance: It provides a foundation for the goods and services. Without this, goods and services would not be produced. relates to: labor, capital, factors of economy, scarcity, shortage

goods

definition: physical objects such as clothes or shoes importance: essential in a business in the economy in that it is what customers buy and how people make money relates to: services, scarcity, wants, need

need

definition: something like air, food, or shelter, that is necessary for survival. importance: often times, one's needs are more important than their wants. In economic situations, needs > wants. Determines how an entrepreneur will run his/her business. relates to: want, economics, scarcity

production possibilities curve

definition: a curve that shows alternative ways to use an economy's resources importance: allows the businessperson to see the negatives and positives of producing two or more goods at the same time which allows them to make the best decision they can for profit relates to: scarcity, production possibilities frontier

guns or butter

definition: a phrase that refers to the trade-off that nations face when choosing whether to produce more or less military or consumer goods importance: relates to:

shortage

definition: a situation in which a good or service is unavailable, or a situation in which the quantity demanded is greater than the quantity supplied, also known as excess demand importance: sometimes, a shortage can result in high prices for goods and services relates to: scarcity, opportunity cost

services

definition: actions or activities one person performs for another importance: services provide assistance to the citizens and people. (ex. a barbershop, tutoring) relates to: goods, scarcity, want, need

physical capital

definition: all human-made goods that are used to produce other goods and services; tools and buildings importance: relates to: capital, land, labor

entrepreneur

definition: ambitious leader who combines land, labor, and capital to create and market new goods and services importance: Entrepreneurs are important because they are the ones to execute the duties after creating goods and services. They are the ones who sell these goods and services to make profit. Without entrepreneurs, goods would not be distributed to people. relates to: Capital, labor, land, economy

trade-off

definition: an alternative we sacrifice when we make a decision importance: Allows the nation to gain profit in a way that they receive something and give out something. - A skill that is needed by entrepreneurs relates to: opportunity cost, entrepreneur

want

definition: an item that we desire but that is not essential to survival importance: relates to:

scarcity

definition: limited quantities of resources to meet unlimited wants importance: places boundaries on what people goods and services can be produced. Makes people think on the margin and abut opportunities cost. relates to: want, need, service, good, shortage, land, labor, capital, underutilization

labor

definition: the effort that people devote to a task for which they are paid importance: Without labor, the goods and services would not be executed. Without people working to make these goods, goods cannot be produced for profit, Labor is essential in creating any kind of product. It allows mass production. relates to: land, capital, human capital. entrepreneur

production possibilities frontier

definition: the line on a production possibilities graph that shows the maximum possible output for a specific economy importance: allows people to predict how much profit they will make and make decisions from there. relates to: production possibilities curve, efficiency

opportunity cost

definition: the most desirable alternative given up as the result of a decision importance: best decisions are made when opportunity costs are lowered. relates to: thinking at the margin, trade off, entrepreneur

human capital

definition: the skills and knowledge gained by a worker through education and experience importance: allows people to use the knowledge they can to help profit the businesses and make more money relates to: labor

economics

definition: the study of how people seek to satisfy their needs and wants by making choices importance: shows us how money is regulated and how businesses make profit relates to: scarcity, need, want, goods, services

cost

definition: to an economist, an alternative that is given up as the result of a decision importance: relates to:

underutilization

definition: using fewer resources than an economy is capable of using importance: relates to:

efficiency

definition: using resources in such a way as to maximize the production of goods and services importance: allows businesses to earn more money relates to: production possibilities curve