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Ch. 1 terms
terms for chapter 1: what's economics?
| Term | Definition |
|---|---|
| need | something essential for survival |
| want | something that people desire but that is not necessary for survival |
| goods | physical objects that someone produces |
| services | actions or activities that one person performs for another |
| scarcity | principle that limited amounts of goods and services are available to meet unlimited wants |
| economics | study of how people seek to satisfy their needs and wants by making choices |
| shortage | situation in which consumers want more of a good or service than producers are willing to make available at particular prices |
| entrepreneur | person who decides how to combine resources to create goods and services |
| factors of production | resources that are used to make goods and services |
| land | all natural resources used to produce goods and services |
| labor | the effort people devote to tasks for which they are paid |
| capital | any human-made resource that is used to produce other goods and services |
| physical capital | human-made objects used to create other goods and services |
| human capital | knowledge and skills a worker gains through education and experience |
| trade-off | alternatives that we give up when we choose one course of action over another |
| "guns or butter" | phrase expressing the idea that a country that decides to produce more military goods ("guns") has fewer resources to produce consumer goods ("butter") and vice versa |
| opportunity cost | most desirable alternative given up as result of a decision |
| thinking at the margin | process of deciding how much more or less to do |
| cost/benefit analysis | decision-making process in which you compare what you will sacrifice and gain by a specific action |
| production possibilities curve | graph that shows alternative ways to use an economy's productive resources |
| efficiency | use of resources in such a way as to maximize the output of goods and services |
| underutilization | use of fewer resources than an economy is capable of using |
| law of increasing costs | economic principle which states that as production shifts from making one good or service to another, more and more resources needed to increase production of second good or service |
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