Foundations of Economics Vocabulary
Human Capital
The sum of people's skills, abilities, health and motivation
Mixed System
An economic system that includes both private ownership of property and government control (or regulation) of some services and industries
Income Distribution
how the nation's total income is distributed among its population
Productive Resources
include Natural resources, human resources, capital resources and entrepreneurship
Economic Growth
steady growth in the productive capacity of the economy (and so a growth of national income)
Property rights
the ability of an individual to own and exercise control over scarce resources
Voluntary Exchange
the act of buyers and sellers freely and willingly engaging in market transactions
Profit Motive
the driving force that encourages individuals and organizations to improve their material well-being
Human Capital
the skills and knowledge gained by a worker through education and experience
Private Property Rights
Allowing individuals to own and control their possessions as they wish
Adam Smith
(1723-1790) Scottish philosophe who formulated laws that governed the economy to benefit human society
Production Possibilities Curve
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
Efficiency
A measure of how well or how productively resources are used
Entrepreneur
A person who organizes, manages, and takes on the risks of a business.
Tradeoffs
Alternatives that one must give up when one is chosen over another
Capitalism
An economic system based on private ownership of capital
Scarcity
Basic condition that exists when unlimited wants exceed limited productive resources.
Opportunity Cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
Traditional System
Decisions are based on customs and religious beliefs handed down from generation to generation
Laissez Faire
Idea that government should play as small a role as possible in economic affairs
Factors of Production
Land, labor, and capital; the three groups of resources that are used to make all goods and services
Land/Natural Resource
Not created by human effort. One of the four factors of production
Labor
People with all their efforts, abilities, and skills
Market System
Private individuals and firms control all resources and the price and quantity of all goods are determined by the interaction of suppply and demand
Standard of Living
Quality of life based on ownership of necessities and luxuries that make life easier.
Marginal Benefit
The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service
Productivity
The degree to which resources are being used efficiently to produce goods and services
Command System
The government controls all markets determining what to produce, how to produce, and for whom to produce
Incentives
What motivates you to behave in a certain way, while preferences are your needs, wants and desires. Economic incentives provide you the motivation to pursue your preferences.
Cost-benefit analysis
a study that compares the costs and benefits to society of providing a public good
Physical Capital
all human-made goods that are used to produce other goods and services; tools and buildings