Economics Test Chapter 1-3 – Flashcards
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need
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something like air, food, or shelter that is necessary for survival
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want
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an item that we desire but that is not essential to survival
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economics
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the study of how people seek to satisfy their needs and wants by making choices
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goods
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physical objects such as clothes or shoes
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services
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actions or activities that one person performs for another
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scarcity
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limited quantities of resources to meet unlimited wants
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shortage
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a situation in which a good or service is unavailable
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factors of production
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land, labor, and capital; the three groups of resources that are used to make all goods and services
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land
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natural resources that are used to make goods and services
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labor
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the effort that people devote to a task for which they are paid
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capital
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any human made resource that is used to create other goods and services
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physical capital
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all human-made goods that are used to produce other goods and services; tools and buildings
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human capital
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the skills and knowledge gained by a worker through education and experience
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entrepreneur
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ambitious leader who combines land, labor, and capital to create and market new goods and services
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trade-off
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an alternative that we sacrifice when we make a decision
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guns or butter
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a phras that refers to the trade-off that nations face when choosing whether to produce more or less military or consumers goods
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opportunity cost
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the most desirable alternative given up as the result of a decision
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thinking at the margin
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deciding whether to do or use one additional unit of some resource
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production possibilities curve
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a graph that shows alternative ways to use an economy's resources
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production possibilities frontier
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the line on the production possibilities graph that shows the maximum possible output
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efficiency
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using resources in such a way as to maximize the production of goods and services
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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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to an economist the alternative that is given up because of a decision
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law of increasing costs
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law states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
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economic system
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the method used by a society to produce and distribute goods and services
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factor payments
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the income people receive for supplying factors of production, such as, land, labor, and capital
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patriotism
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the love of one's country; the passion that inspires a person to serve his or her country
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safety net
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government programs that protect people experiencing unfavorable economic conditions
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standard of living
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level of economic prosperity
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traditional economy
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economic system that relis on habit, custom, or ritual to decide questions of production and consumption of goods and services
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market economy
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economic system in which decisions on production and consumption of goods and services are based on voluntary exchange markets
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centrally planned economy
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economis system in which the central government makes all the decisions
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command economy
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economis system in which central authority is in command of the economy; a centrally planned economy
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mixed economy
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market-based economic system with limited government involvement
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market
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an arrangement that allows buyers and sellers to exchange things
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specialization
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the concentration of the productive efforts of individuals and firms on a limited number of activities
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household
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a person or group of people living in the same residence
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firm
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an organization that uses resources to produce a product, which it then sells
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factor market
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market in whick firms purchase the factors of production from households
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profit
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the financial gain made in a transaction
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product market
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the market in which households purchase the goods and services that firms produce
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self-interest
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one's own personal gain
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incentive
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an expectation that encourages people to behave in a certain way
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competition
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the struggle among producers for the dollars of consumers
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invisible hand
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term economists use to describe the self-regulating nature of the marketplace
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consumer sovereignity
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the power of consumers to decide what gets produced
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socialism
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a social and political philosophy based on the belief that democraticmeans should be used to evenly distribute wealth throughout society
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communism
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a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central gov't
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authoritarian
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requiring strict obedience to an authority, such as a dictator
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collective
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large farm leased from the state to groups of peasant farmers
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heavy industry
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industry that requires a large capital investment that produces items used in other industries
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laissez faire
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the doctrine that states that government generally should not intervene in the marketplace
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private property
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property owned by individuals or companies, not by the government or the people as a whole
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free enterprise
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an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
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continuum
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a range with no clear divisions
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transition
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period of change in which the economy moves away from a centrally planned toward a market-based economy
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privatize
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to sell state-run firms to individuals
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profit motive
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the force that encourages people and organizations to improve their material well-being
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open opportunity
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the concept that everyone can compete in the market place
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legal equality
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the concept of giving everyone the same legal rights
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private property rights
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the concept that people have the right and privilege to control their possessions as they wish
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free contract
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the concept that people may decide what agreements they want to enter in
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voluntary exchange
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the concept that people may decide what and when they want to buy and sell
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competition
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the rivalry among sellers to attract customers while lowering costs
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interest groups
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a private organization that tries to persuade the public officals to act or vote according to group members' interests
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public disclosure laws
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laws requiring companies to provide full information about their prodicts
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public interests
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concerns of the public as a whole
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macroeconomics
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the study of the behavior and decision making of entire economics
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microeconomics
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the study of the economic behavior and decision making of small units , such as individuals , families, and businisses
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gross domestic product (GDP)
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the total value of all final goods and services produced in particular economy
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business cycle
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a period of macroeconomics expansion followed by a period of contraction
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work ethic
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commitment to the value of work and purposeful activity
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technology
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the process used to produce goods and services
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public good
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a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
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public sector
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the part of the economy that involves the transactions of the government
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private sector
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the part of the economy that involves the transactions of individuals and businesses
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free rider
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someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good
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market failure
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a situation in which the market does not distribute resources efficiently
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externality
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an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
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poverty threshold
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an income level below that which is needed to support families or households
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welfare
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government aid to the poor
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cash transfers
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direct payments of money to eligible poor people
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in-kind benefits
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goods and services provided for free or at greatly reduced prices
