Economics: Chapter 1 Terms

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

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.

natural resources and surface land and water

human effort directed toward producing goods and services.

tangible objects that can satisfy people’s wants

actions that can satisfy people’s wants

previously manufactured goods used to make other goods and services.

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

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

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

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.

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.

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

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

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

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