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Chaper 1-3 vocab

Need something essential for survival
Want something desire but that is not necessary for survival
Goods the physical objects that someone produces
Services the actions or activities that one person performs for another
Scarcity the principle that limited amounts of goods and services are available to meet unlimited wants
Economics the study of how people seek to satisfy their needs and wants by making choices
Shortage a situation in which consumers want more of a good or service than producers are willing to make available at a particular price
Entrepreneur a person who decides how to combine resources to create goods and services
Factors of production the 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 the knowledge and skills a worker gains through education and experience
Trade-off the act of giving up one benefit in order to gain another, gather benefit
"Guns or butter" a phrase expressing the idea that a country that describes to produce more military goods ("guns") has fewer resources to produce consumer goods ("butter") and vice versa
Opportunity cost the most desirable alternative given up as the result of a decision
Thinking at the margin the process of deciding whether to do or use one additional unit of some resource
Cost/benefit analysis a decision-making process in which you compare what you will sacrifice and gain by a specific action
Marginal cost the extra cost of adding one unit
Marginal benefit the extra benefit of adding one unit
Production possibilities curve a graph that shows alternative ways to use an economy's productive resources
Production possibilities frontier a line on a production possibilities curve that shows the maximum possible output an economy can produce
Efficiency the use of resources in such a way to maximize the output of goods and services
Underutilization the use of fewer resources than the economy is capable of using
Law of increasing costs an economic principle states that as production shifts from making one item to another, more and more resources are needed to increase production of the second item
Economic system the structure of methods and principles that a society uses to produce and distribute goods and services
Factor payment the income of people receive in return for supplying factors of production
Profit the amount of money a business receives in excess of the expenses
Safety net a set of government programs that protect people who face unfavorable economic conditions
Standard of living level of economic prosperity
Innovation the process of bringing new methods, products, or ideas into use
Traditional economy an economic system that relies on habit, custom, or ritual to decide the three key economic questions
Market any arrangement that allows buyers and sellers to exchange things
Specialization the concentration of the productive efforts of individuals and businesses of a limited number of activities
Free market economy an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
Household a person or group of people living in a single residence
Firm an organization that uses resources to produce a product or service, which it then sells
Factor market the arena of exchange in which firms purchase the factors of production from households
Product market the arena of exchange in which households purchase goods and services from firms
Self-interest an individual's own personal gain
Incentive the hope of reward or fear of penalty that encourages a person to behave in a certain way
Competition the struggle among producers for the dollars of consumers
Invisible hand a term coined by Adam Smith to decide the self-regulating nature of the marketplace
Consumer sovereignty the power of consumers to decide what gets produced
Centrally planned economy an economic system in which the government makes all decisions on the three key economic questions
Command economy another name for a centrally planned economy
Socialism a range of economic and political systems based on the belief that wealth should be evenly throughout society
Communism a political system in which the government owns and controls all resources and means of production and makes all economic decisions
Authoritarian describes a form of government that limits individual freedoms and require strict obedience from their citizens
Laissez faire the doctrine that government generally should not intervene in the marketplace
Private property property that is owned by individuals or companies and not by the government or the people as a whole
Mixed economy a market-based economic system in which the government is involved to some extent
Economic transition a period of change in which a nation moves from one economic's system to another
Privatization the process of selling business or services operated by the government to individual investors, and then allowing them to compare in the marketplace
Free enterprise system an economic system characterized by individual or corporate ownership of capital goods
Profit motive the incentive that drives individuals and business owners to improve their material well-being
Open opportunity the principle that anyone can complete in the marketplace
Legal equality the principle that everyone has the same legal rights
Private property rights the principle that people have the right to control their possessions and use them as they wish
Free contract the principle that people may decide what agreements they want to enter into
Voluntary exchange the principle that people may decide what, when, and how they want to buy and sell
Interest group a private organization that tries to persuade public officials to act in ways that benefit its members
Patriotism love of one's country
Eminent domain a right of a government to take private property for public use
Public interest the concerns of society as a whole
Public disclosure laws laws requiring companies to provide information about their products or services
Macroeconomics the study of economic behavior and decision-making in a nation's whole economy
Microeconomics the study of the economic behavior and decision-making in small units, such as households and firms
Gross domestic product the total value of all final goods and services produced in a country in a given year
Business cycle a period of macroeconomic expansion, or growth, followed by one of contraction, or decline
Referendums a proposed law submitted directly to the public
Obsolescence situation in which older products and processes become out-of-date
Patent a government license that gives the inventor of a new product the exclusive right to produce and sell it
Copyright a government license that grants an author exclusive rights to publish and sell creative works
Work ethic a commitment to the value of work
Public good a shared good or service for which it would be inefficient or impractical to make consumers pay individually and to exclude those who did not pay
Public sector the part of the economy that involves the transactions of the government
Private sector the part of the economy that involves the transactions of individuals and businesses
Infrastructure the basic facilities that are necessary for a society to function and grow
Free rider someone who would not be willing to pay for a certain good or service but would get the benefits of it anyway if it were provided as a public good
Market failure a situation in which the free market, operating on its own, does not distribute resources efficiently
Externality 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
Poverty threshold an income level below that which is needed to support families or households
Welfare government aid to the poor
Cash transfers direct payments of money by the government to poor, disabled, or retired people
In-kind benefits goods and services provided for free or at greatly reduced prices
Grant a financial award given by a government agency to a private individual or group in order to carry out a specific task
Created by: VKimbrell718
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