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Economics Unit 1
| Term | Definition |
|---|---|
| Economics | the study of how people fulfill their unlimited wants in a world where resources are scarce |
| Renewable resources | resources that can be drawn on indefinitely if used conservatively (ex: solar energy, water, wind) |
| Non-renewable resources | resources that cannot be readily replaced by natural means on a level equal to its consumption (ex: phosphate, oil, limestone) |
| Scarcity | when a resource or factor of production is not available in sufficient quantities to satisfy the ways society uses it |
| Microeconomics | the study of individual markets (ex: effects on the price of one good, an individual labor market, individual consumer behavior, supply of one good) |
| Macroeconomics | the study of a whole economy (GDP) (ex: inflation, employment and unemployment, aggregate demand (AD), and productive capacity of an economy) |
| Positive economics | study of economics that states the facts without the input of opinions or value judgements |
| Normative economics | study of economics that states facts in addition to value judgements, states the desirable reality, and asserts how things "should" be |
| Resources | inputs used to produce goods (g) or services (s) |
| Land | includes all natural resources used to produce goods and/or services |
| Capital | aids or tools used to produce goods and/or services |
| Physical capital | capital that includes buildings, machines, tools, equipment, workspaces, etc. |
| Human capital | capital that includes acquired skills, knowledge, and/or education |
| Entrepreneurial ability | the ability to unite and compose factors of production to produce a profit |
| Rational pursuit of self-interest | individuals (and companies, governments, etc.) look for and pursue opportunities to increase their utility |
| Marginal analysis | method for finding the optimal amount of any activity by weighing the additional benefits of doing that activity |
| Incentives | potential rewards or consequences that motivate particular choices within a market |
| Transaction costs | the time and information gathering required to make a rational financial decision |
| Sunk costs | costs that have already been incurred and cannot be recovered (non-refundable costs) |
| Opportunity cost | value of the next best alternative forgone when a decision is made (ex: monetary margin between buying butter and buying margarine) |
| Production possibilities curve | economists' model to theorize how the production of one service or good impacts another's, or how an economy can use its resources to produce two different goods |
| Economic efficiency | an economy's ability to make one better off without making another worse off |
| Law of Increasing Opportunity Cost | states that the opportunity cost of a good rises as more of the good is produced |
| Economic growth | an increase in the ability to produce goods and services over time |
| Economic equity | the economic goal of distributing equal opportunity |
| Economic freedom | the economic goal of the freedom for consumers to decide how to save/spend their incomes, to change jobs and form unions, and to close business or establish new ones |
| Economic growth | the economic goal of increasing production, measured by changes in gross domestic product (GDP) |
| Economic security | the economic goal of protecting consumers from risks that exist in society |
| Economic stability | the economic goal of maintaining stable prices, employment, and growth |
| Price stability | avoiding inflation or deflation |
| Full employment | when an economy's scarce resources, especially labor, are fully utilized |
| Traditional economy | type of economy where decisions are based on traditional/historical precedent (ex: in a caste system, jobs are determined on what your family lineage has done) |
| Command/centralized economy | type of economy where governmental planning groups make the decisions to determine what and how to produce, what to price them at, and what to pay workers for their work (ex: Cuba, North Korea) |
| Market economy | type of economy where decisions are guided by individual buyers and sellers in the marketplace (ex: capitalism, free market, laissez-faire) |
| Mixed economy | type of economy that is neither centralized nor decentralized, and has features of both |
Created by:
ameyer24saintursula
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