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Fundamental Terms
Armuchee Fundamental Economic Terms
| Question | Answer |
|---|---|
| Limited quantities of resources to meet unlimited wants | Scarcity |
| The most desirable alternative given up as the result of a decision. | Opportunity cost |
| All of the alternatives we give up when we make a decision. | Trade-offs |
| Natural resources that are used to make goods and services. | Land |
| The effort that people devote to a task for which they are paid. | Labor |
| Any human made resource that is used to create other goods or services. | Capital |
| An individual who combines land, labor, and capital in order to produce a good or service. | Entrepreneurship |
| The benefit gained from producing one more unit of a good. | Marginal benefit |
| The cost of producing one more unit of a good. | Marginal cost |
| Visually shows the alternative ways to use an economy’s resources. | Production possibilities curve |
| The concentration of the productive efforts of individuals and firms on a limited number of activities. | Specialization |
| When people decide what and when they want to buy and sell. | Voluntary exchange |
| System in which the central government makes all decisions on productions and consumption of goods. | Command economy |
| System in which decisions on the production and consumption of goods and services are based on voluntary exchange. | Market economy |
| System that combines free market ideas with government involvement. | Mixed economy |
| Owned by individuals or companies, not the government. | Private property |
| The force that encourages people or organizations to improve their material well being. | Profit motive |
| The power of the people to decide what gets produced. | Consumer sovereignty |
| Rivalry of sellers to attract customers while lowering costs. | Competition |
| Government intervention in a market that impacts the production of a good or service. | Government regulation |
| Removal of government controls in the market place. | Government deregulation |
| The opportunity to make our own choices without government interference. | Economic freedom |
| Helping to provide for some people through social programs (safety net). | Economic security |
| Creating a society that is just and fair. | Economic equity |
| Having an expanding economy that supports an increase in production, jobs, and wealth. | Economic growth |
| Using our limited resources wisely and efficiently. | Economic efficiency |
| Creating a society that avoids extreme ups and downs in the standard of living. | Economic stability |
| Shared good or service for which it would be impractical to make consumers pay individually and exclude non-payers. | Public goods |
| How a nation’s total income is distributed among its population. | Income redistribution |
| Value of output produced. | Productivity |
| Level of economic prosperity. | Standard of living |
| The factors of production that go into producing a final good or service. | Inputs |
| The final good or service that is produced. | Outputs |
| The trade-off that nations face when choosing whether to produce more or less military or consumer goods. | Guns & Butter |
| Something that is necessary for survival (air, food shelter). | Need |
| Goods and services that we desire but are not necessary to our survival. | Want |
| The resources that are used to make all goods and services. | Factors of production |
| All manufactured resources used to produce other goods and services (i.e. buildings, manufacturing equipment). | Physical Capital |
| Accumulated training and education of workers. | Human Capital |
| The use of goods and services for personal satisfaction | Consumption |
| The ability to produce a good or service at a lower opportunity cost | Comparative Advantage |
| The ability to produce more of a good or service than another. | Absolute Advantage |
| Assigning different workers different tasks to produce a good or service | Division of Labor |
| Must know what you are getting (not tricked or deceived) | Non-fraudulent |
| When a market does not distribute resources efficiently. | Market Failure |
| Unintended side effect of doing business either positive or negative. | Externality |
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Armuchee
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