Economics Unit 1 Vocabulary Flashcard

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Capital
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Equipment and factories used in the production of goods and services
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Command economy
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General name for and economic system characterized by a central authority which makes major economic decisions
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Competition
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Rivalry that may refer to rivalry among firms, or individuals, or the race to control resources
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Consumer
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One who buys goods or services for personal use
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Consumer good
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Finished product used by an individual for personal use
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Consumer sovereignty
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In a market economy, role of the customer as the ruler of the market; decides what goods and services will be produced
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Deregulation
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Process of reducing or eliminating government regulations on an industry, allowing more laissez-faire business practices; major issue in the airline, automobile, and power industries since the 1980s.
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Economic growth
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Increase in value of the goods and services produced by an economy
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Economic system
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Way in which a society deals with production, distribution, and consumption of goods and services
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Entrepreneur
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Person who takes risks of a new business enterprise
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Factors of production
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Land, labor, capital, and entrepreneurship
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Government regulation
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Refers to rules established at some level of government for the purpose of guiding business practices; commonly accepted that it may increase the cost of doing business
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Incentive
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Any factor, usually financial to influence one choice over another by an individual or business
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Investment
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Generally the act of providing funds to a financial organization for the purposes of making that organization more profitable, while earning a personal profit at the same time
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Labor
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One of the main factors of production; measure of work done by people
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Land
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One of the factors of production (productive resource), referring to anything that is taken from the earth during the production of a good or service
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Marginal benefit
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Additional or extra benefit associated with an action
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Marginal cost
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Change in total cost of an item that occurs when the quantity produced changes by one unit
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Market economy
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Economy in which the government has little to say about what, how, and for whom the goods are produced; the factors of production are privately owned
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Mixed economy
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Name given to an economy that may contain market, command, and/or traditional economic systems
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Need
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Something a person MUST have in order to survive, as opposed to something a person might simply desire
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Opportunity cost
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Value lost when one alternative is chosen over another
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Production possibilities curve/ frontier
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Diagram showing the maximum amount of goods and/or services an economy can produce
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Productivity
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This is the amount of goods or services produced per input used
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Profit motive
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In a market economy, the driving force that encourages individuals and organizations to improve their material well-being
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Rational decision
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Are made when people, businesses, and/or the government determine the benefit of an action is equal to or exceeds the cost
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Regulation
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Legal restrictions set forth by a government to produce desired outcomes
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Resources
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Factors of production used in the making of goods and services
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Scarcity
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When resources are limited and the need for a good or service is higher for a society than what is produced
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Specialization
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When each worker performs a specific task in production
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Standard of living
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Term used to describe the general way in which people live, focusing primarily on things like average income, health care availability, life expectancy, educational attainment, etc.
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Trade off
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Economic situation related to opportunity cost in which one thing is given up in order to do something else
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Variable cost
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Expense for a good or product that changes in proportion to the activity of the company
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Voluntary exchange
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Act of buyers and sellers freely and willingly engaging in market transactions

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