Economics Unit 1 part 1 Vocabulary

productive resources/factors of production

The scarce items used in the production of goods and services in an economy.

consumer sovereignty

determines the goods and services an economy produces because businesses will only produce those products that consumers are willing to buy

innovation

development of new products, processes, organizations, management practices, and strategies - key motivation of entrepreneurs

specialization

individuals or businesses concentrate on a single activity or an area of expertise when producing a good or service

economic system

models that economists use to explain how decision-makers in an economy are likely to view certain economic principles

subsidy

monetary transfer from a government to a business for undertaking a particular desirable action

incentive

motivates individuals, businesses, and/or governments to undertake an action (positive) or avoid an action (negative)

human resources

people involved in the production of goods and services.

entrepreneur

person who takes risks such as using one's own financial resources to make a prototype of a product or buy the capital resources required to start the business

profit motive

primary driver of entrepreneurship - desire to make a profit (money)

mixed economic system

real world economies have some characteristics of all three economic systems, but tend to lean toward one of the three

competition

rivalry among producers or sellers of similar goods and services to win more business

marginal

small or incremental change

profit

the amount of revenue (price times quantity sold) received by a business minus the costs of operating the business

market economic system

the answers to the three basic economic questions are determined by the interactions of buyers and sellers in the market

government regulation

the extent to which a central authority has control over the production and consumption decisions in an economy.

division of labor

the type of arrangement in which each worker specializes in a particular task or job - workers get better at their tasks through repetition and can do the task more quickly with fewer errors

traditional economic system

three basic economic questions are answered based on how things have always been done in the past

command economic system

three basic economic questions are answered by a central authority or government

physical capital

tools, machines, and structures used over and over again in the production of goods and services

voluntary exchange

two people willingly trade one item for another because the value of the item they are receiving is greater at the time than the item they are giving up to receive it

opportunity cost

value of one's next best alternative given up when a choice is made

rational decision

when the marginal benefit of an action is equal to or greater than the marginal costs of the action

private ownership

The ability of individuals and businesses in an economy to buy, sell, and hold property as they wish without fear of government interference or seizure.

natural Resources (Land)

The gifts of nature we use to produce goods and services

shortage

When a resource, good, or service becomes unavailable for a period of time (temporary) due to circumstances affecting the market

human capital

abilities (physical, knowledge, and skills) that each person brings to the production process

marginal cost

additional amount of effort, expense, or time one incurs from undertaking one more unit of an action

marginal benefit

additional positive value one receives from undertaking one more unit of an action

scarcity

basic condition that exists when unlimited wants exceed limited productive resources