Chapter 1 What is Economics (Economics)
Production Possibilities Curve
A graph that shows alternative ways to use an eonomy's resources.
Guns or Butter
A phrase that refers to trade-offs that nations face when choosing whether to produce more or less military or consumer goods.
Shortage
A situation in which a good or service is unavailable.
Services
Actions or activites that one person performs for another.
Physical Capital
All human-made goods that are used to produce other goods and services; tools and buildings.
Entrepreneur
Ambitious leader who combines land, labor, and capital to create and market new 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.
Capital
Any human-made resource that is used to create other goods and services.
Thinking at the Margin
Deciding whether to do or use one additional unit of some resource.
Factors of Producation
Land labor, capital; the three groups of resources that are used to make all goods and services.
Law of Increasing Cost
Law that states that as we shift factore of producation from making one good or service to another, the cost of producing the second item increases.
Scarcity
Limited quantities of resources to meet unlimited wants.
Land
Natural resources that are used to make goods and services.
Goods
Physical objects such as cloths or shoes.
Need
Something like air, food, or shelter that is necessary for survival.
Labor
The effort that people devote to a task for which they are paid.
Producation Possibilities Frontier
The line on a producation possibilities graph that shows the maximum possible output.
Opportunity Cost
The most desirable alternative given up as the result of a decision.
Human Capital
The skills and knowledge gained by worker through education and experience.
Economics
The study of how people seek to satisfy thier needs and wants by making choices.
Cost
To an economist, the alternative that is given up becuase of a decision.
Underutilization
Using fewer resources than an economy is capable of using.
Efficiency
Using resources in such a way as to maximize the producation of goods and services.