Unit 1: Fundamental Economic Concepts
Productive Resources/Factors of production
The scarce items used in the production of goods and services in an economy.
Entrepreneurship
Risking one's own financial resources to start a business in hopes of profit
Traditional economies
economy based on how things have been done for generations
Market economies/Capitalism
economy based on private ownership and the determination of prices by supply and demand
Command economies
economy in which the gov't makes all economic decisions
Economic Equity
fairness in the economy, whether from equal access, or from equal outcomes
Government deregulation
government decides to stop or lessen its involvement in a particular industry
Public goods and services
government provided goods/services for everyone to use
Allocation
how countries answer the for whom to produce question
Price stability
making sure that increases in the overall price levels are predictable and protect the purchasing power of money in the economy over time
Market failures
occurs when a private company or industry benefits from production for which other people end up paying some of the costs
Inputs
resources used in production
Production possibilities curve/frontier
shows the amount of one good or service sacrificed to produce additional units of the other good or service
Human capital
skills & knowledge of workers
Incentives
something that motivates individuals, businesses, and/or governments to take or avoid an action.
Government regulation
the extent to which a central authority has control over the production and consumption decisions in an economy.
Sustainability
the goal of individual countries to maintain an upward trend of real Gross Domestic Product growth over time
Standard of living
the material well-being people in an economy enjoy
Opportunity cost
the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.
Human resources (labor and human capital)
the people involved in the production of goods and services. People offer their time, physical abilities, knowledge, and skills.
Productivity
the ratio of inputs to outputs. the rate at which goods and services are produced
Physical capital
tools, machines, and structures used over and over again in the production of goods and services.
Division of labor
type of specialization which different workers do different parts of the same job
Investment
using resources that could bring immediate benefits for the purposes of gaining greater benefits
Full employment
All willing and able workers having the opportunity to do so; an unemployment rate between 4% and 6%.
Innovation
A way to improve efficiency or production, or a new invention.
Consumer sovereignty
Consumers' ability to buy what they want, which determines the goods and services in an economy.
Mixed economies
Have some characteristics of all three economies, but tend to lean toward one of the three.
Economic Security
How an economy protects individuals and businesses from risk.
Economic Growth
Increasing the production of goods and services over time.
Voluntary exchange
People/Businesses freely choosing to participate in market transactions
Rational decision making
Selecting a choice when the marginal benefits are equal to or greater than the marginal costs.
Economic Freedom
The ability of consumers, producers, and workers to make their own decisions about consumption, production, and distribution of goods and services.
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.
Marginal costs
The additional amount of effort, expense, or time one incurs from undertaking one more unit of an action.
Marginal benefits
The additional positive value one receives from undertaking one more unit of an action.
Natural Resources (land)
The gifts of nature we use to produce goods and services
Profit motive
The incentive of the extra money a business will receive in revenue after paying the costs of operating the business.
Specialization
When individuals or businesses concentrate on a single activity or an area of expertise when producing a good or service.
Economic Efficiency
When the factors of production are allocated to their most productive use.
Scarcity
a basic condition that exists when unlimited wants exceed limited productive resources
Competition
a struggle among businesses to gain customers
Trade-offs
act of giving up one thing of value to gain another
Outputs
amount of good/service produced
