Chapter 1 - Economy

Trade-off

Exchanging one thing for another.

Labor

Human effort directed toward producing goods and services.

4 examples of Factors of Production

Land, Labor, Capital, and entrepreneurship.

Factors of Production

Resources needed to produce goods and services.

Fads

Something that becomes popular over night and dies quickly.

Goods

Tangible items that people can buy.

Entrepreneurship

The ability of individuals to start new businesses; risk takers.

Microeconomics

The behavior and decision making by small units such as individuals and firms.

Economy

The production and distribution of goods and services in a society.

Opportunity Cost

The value of the next best alternative that had to be given up to do the action that was chosen.

Production Possibilities Curve

This shows the maximum combinations of goods and services that can be produced form a fixed amount of resources in a given period of time.

Economic Model

A theory or simplified representation that helps explain and predict economic behavior in the real world. Simplified representations of the real world.

Services

Actions that satisfy people's wants or needs.

Productivity

Amount of output that results from a given level of inputs.

Hypothesis

An assumption involving two or more variables that must be tested for validity.

Technology

Any use of land, labor and capital that produces goods and services more efficiently.

Scarcity

Basic economic problem out there that results from a combination of limited resources and unlimited wants.

Capital

Goods used to make other goods and services.