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
