Economics Terms

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Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

Utility

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

service

Any activity that fulfills a human want or need and returns money to those who provide it.

need

Basic requirement for survival

opportunity cost

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

How is economic growth measured?

Gross Domestic Product (GDP)

land

all natural resources used to produce goods and services

Trade-off

an alternative that we sacrifice when we make a decision

want

an item that we desire but that is not essential to survival

Explain why economic education is important

it helps people become better decision makers

economic growth

the ability of the economy to increase the production of goods and services

labor

the effort that people devote to a task for which they are paid

How do goods and services differ?

*Goods are tangible products, and services are work or labor performed for someone.

How does economic growth occur?

1. acquiring more resources 2. finding ways to make better use of resources we have

Specialization

A focus on a particular activity or area of study

Entrepreneur

A person who starts up and takes on the risk of a business

Why is economics considered a social science?

It deals with and studies the behavior of people and societies as they deal with the problem of scarcity.

factors of production

Land, labor, and capital; the three groups of resources that are used to make all goods and services

standard of living

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

production

The process of creating goods and services

Economics

The study of how people seek to satisfy their needs and wants by making choices

Gross Domestic Product (GDP)

The sum total of the value of all the goods and services produced in a nation

wealth

The total value of money and other assets, minus outstanding debts

Productivity

The value of a particular product compared to the amount of labor needed to make it.

Three basic economic questions

What to produce? How to produce? For whom to produce?

market

a group of buyers and sellers of a particular good or service

good

a physical item that is produced and can be weighed or measured

economic interdependence

a reliance on others, as they rely on you, to provide goods and services to be consumed

economic model

a theory or simplified representation that helps explain and predict economic behavior in the real world

consumer goods

goods produced for present consumption

capital goods

goods that are used in producing other goods, rather than being bought by consumers.

durable goods

manufactured items that have a life span longer than three years

free enterprise economy

market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention

capital

money for investment

human capital

the skills and knowledge gained by a worker through education and experience

division of labor

the type of arrangement in which each worker specializes in a particular task or job

nondurable goods

those goods that last a short period of time, such as food, light bulbs, and sneakers

Inferring

when you explain or interpret the things you observe


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