Economics: Unit 1
need
something like air, food, or shelter that is necessary for survival
invisible hand
term economist use to describe the self-regulating nature of the marketplace
legal equality
the concept of giving everyone the same legal rights
private property rights
the concept that people have the right and privilege to control their possessions as they wish
free contract
the concept that people may decide what agreements they want to enter into
voluntary exchange
the concept that people may decide what and when they want to buy and sell
public interest
the concerns of the public as a whole
labor
the effort that people devote to a task for which they are paid
profit
the finacial gain made in a transaction
factor payments
the income people receive for supplying factors of production -land, labor, capital, or entrepreneurship
production possibilities frontier
the line on a production possibilities graph that shows the maximum possible output
product market
the market in which households purchase the goods and services that firms produce
economic system
the method used by a society to produce and distribute goods and services
opportunity cost
the most desirable alternative given up as the result of a decision
private sector
the part of the economy that involves the transactions of individuals and businesses
technology
the process used to produce a good or service
competition
the rivalry among sellers to attract customers while lowering costs
human capital
the skills and knowledge gained by a worker through education and experience
competition
the struggle among producers for the dollars of consumers
economics
the study of how people seek to satisfy their needs and wants by making choices
macroeconomics
the study of the behavior and decision making of entire economics
microeconomics
the study of the economic behavior and decision making of small units, such as individuals, families, and businesses
Efficiency
using resources in such a way as to maximize the production of goods and services
factors of production
Land, labor, and capital; the three groups of resources that are used to make all goods and services
production possibilities curve
a graph that shows alternative ways to use an economy's productive resources
household
a person or group of people living in the same residence
guns or butter
a phrase that refers to the 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
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
market
an arrangement that allows buyers and sellers to exchange thing
traditional economy
an economy that relies on habit, custom, or ritual to decide what to produce, how to produce it, and whom to distribute it to
incentive
an expectation that encourages people to behave a certain way
want
an item that we desire but that is not essential to survival
firm
an organization that uses resources to produce a product, which it then sells
command economies
another name for centrally planned economies
capital
any human-made resource that is used to produce other goods and services
thinking at the margin
deciding whether to do or use one additional unit of some resource
market economy
economic decisions are made by individuals and are based on exchange, or trade
mixed economy
market based economic systems in which government plays a limited role
factor market
market in which firms purchase the factors of production from households
land
natural resources that are used to make goods and services
goods
physical objects such as clothes or shoes
Services
Actions or activities that one person performs for another
Scarcity
Limited quantities of resources to meet unlimited wants