Economics Unit 1: Chapter 1-3 Study Guide

Trade-off
Alternative choices
Scarcity
A condition that results from society not having enough resources to produce all the things people would like to have
Opportunity cost
The best alternative use of money, time, or resources when one choice is made rather than another
Need
A basic requirement for survival that includes food, clothing, and shelter
Want
A way of expressing a need. An item that is desired, but not essential for survival
Good
An item that is economically useful or satisfies and economic want
Market economy
And economy in which people and firms act in their own best interest to answer the WHAT, HOW, and FOR WHOM questions
Economic system
An organized way of providing for the wants and needs of people
Capital
The tools, equipment, machinery, and factories used in the production of goods and services
Inflation
A rise in the general level of prices
Fixed income
An income that does not increase even though prices go up
Free enterprise
Economy in which competition is allowed to flourish with a minimum of government interference
Voluntary exchange
The act of buyers and sellers freely and willingly engaging in market transactions that leave both buyer and seller better off
Partnership
A business jointly owned by two or more persons
Conglomerate
A firm that has at least for businesses, each making unrelated products, none of which is responsible for the majority of the firm’s sales
Cooperative
A voluntary association of people formed to carry on some kind of economic activity that will benefit its members
Producer cooperative
Helps members sell their products
Nondurable good
not lasting or enduring; consumable or perishable.
Multinational
A corporation that has manufacturing or service operations in a number of different countries
Corporation
A form of business organization recognized by law as a separate legal entity having all the rights of an individual