Economics: Chapter 1 Terms

economics
the study of how individuals and societies make choices about ways to use scarce resources to fulfill their needs and wants.

scarcity
condition of not being able to have all of the goods and services one wants, because wants exceed what can be made from all available resources at any given time.

land
natural resources and surface land and water

labor
human effort directed toward producing goods and services.

goods
tangible objects that can satisfy people’s wants

services
actions that can satisfy people’s wants

capital
previously manufactured goods used to make other goods and services.

productivity
the amount of output (goods and services) that results from a given level of inputs (land, labor, capital)

entrepreneurship
ability of risk-taking individuals to develop new products and start new businesses in order to make profits.

technology
advance in knowledge leading to new and improved goods and services and better ways of producing them.

trade-off
sacrificing one good or service to purchase or produce another.

opportunity cost
value of the next best alternative given up for the alternative that was chosen.

production possibilities curve
graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.

economy
the production and distribution of goods and services in a society.

economic model
a theory or simplified representation that helps explain and predict economic behavior in the real world.

hypothesis
an assumption involving two or more variables that must be tested for validity

factors of production
resources of land, labor, capital, and entrepreneurship used to produce goods and services

microeconomics
the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.

macroeconomics
the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments.