Chapter 1: What Is Economics? Flashcard
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Need
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Something necessary for survival
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Want
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Item that is desirable but not necessary for survival
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Economics
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Study of how people make choices to gain necessities and desires
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Goods
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physical items such as shoes and cars
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Services
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Activities one person performs for another
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scarcity
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Limited resources for meeting unlimited wants and desires
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shortage
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Unavailability of a good or service in a given situation
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Factors of Production
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Land, labor and capital
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Land
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All natural resources used in production
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Labor
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Work for which a person is paid
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Capital
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Any human-made resource used to create other goods or services
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Physical Capital
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Kind of capital involving human made goods
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Human Capital
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Kind of capital involving skills and knowledge gained by a worker
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Entrepreneur
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Brings together people and resources to create and market new goods and services
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Trade-off
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An alternative sacrificed when making a decision
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guns or butter
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Government choice between making military goods or consumer goods
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Opportunity cost
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Most desirable option given up in a decision
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production possibility curve
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a graph that shows alternative ways to use an economy's resources
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efficiency
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use of resources that maximizes the output of products
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production possibility frontier
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the line on a PPG that shows the maximum possible output
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underutilization
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Using fewer resources than an economy is capable of using
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cost
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alternative sacrificed because of an economic decision
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law of increasing costs
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law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
