Chaper 1-3 vocab
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| Need | something essential for survival
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| Want | something desire but that is not necessary for survival
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| Goods | the physical objects that someone produces
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| Services | the actions or activities that one person performs for another
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| Scarcity | the principle that limited amounts of goods and services are available to meet unlimited wants
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| Economics | the study of how people seek to satisfy their needs and wants by making choices
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| Shortage | a situation in which consumers want more of a good or service than producers are willing to make available at a particular price
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| Entrepreneur | a person who decides how to combine resources to create goods and services
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| Factors of production | the resources that are used to make goods and services
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| Land | all natural resources used to produce goods and services
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| Labor | the effort people devote to tasks for which they are paid
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| Capital | any human-made resource that is used to produce other goods and services
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| Physical capital | human-made objects used to create other goods and services
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| Human capital | the knowledge and skills a worker gains through education and experience
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| Trade-off | the act of giving up one benefit in order to gain another, gather benefit
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| "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
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| Opportunity cost | the most desirable alternative given up as the result of a decision
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| Thinking at the margin | the process of deciding whether to do or use one additional unit of some resource
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| Cost/benefit analysis | a decision-making process in which you compare what you will sacrifice and gain by a specific action
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| Marginal cost | the extra cost of adding one unit
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| Marginal benefit | the extra benefit of adding one unit
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| Production possibilities curve | a graph that shows alternative ways to use an economy's productive resources
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| Production possibilities frontier | a line on a production possibilities curve that shows the maximum possible output an economy can produce
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| Efficiency | the use of resources in such a way to maximize the output of goods and services
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| Underutilization | the use of fewer resources than the economy is capable of using
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| 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
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| Economic system | the structure of methods and principles that a society uses to produce and distribute goods and services
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| Factor payment | the income of people receive in return for supplying factors of production
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| Profit | the amount of money a business receives in excess of the expenses
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| Safety net | a set of government programs that protect people who face unfavorable economic conditions
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| Standard of living | level of economic prosperity
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| Innovation | the process of bringing new methods, products, or ideas into use
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| Traditional economy | an economic system that relies on habit, custom, or ritual to decide the three key economic questions
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| Market | any arrangement that allows buyers and sellers to exchange things
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| Specialization | the concentration of the productive efforts of individuals and businesses of a limited number of activities
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| Free market economy | an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
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| Household | a person or group of people living in a single residence
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| Firm | an organization that uses resources to produce a product or service, which it then sells
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| Factor market | the arena of exchange in which firms purchase the factors of production from households
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| Product market | the arena of exchange in which households purchase goods and services from firms
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| Self-interest | an individual's own personal gain
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| Incentive | the hope of reward or fear of penalty that encourages a person to behave in a certain way
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| Competition | the struggle among producers for the dollars of consumers
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| Invisible hand | a term coined by Adam Smith to decide the self-regulating nature of the marketplace
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| Consumer sovereignty | the power of consumers to decide what gets produced
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| Centrally planned economy | an economic system in which the government makes all decisions on the three key economic questions
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| Command economy | another name for a centrally planned economy
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| Socialism | a range of economic and political systems based on the belief that wealth should be evenly throughout society
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| Communism | a political system in which the government owns and controls all resources and means of production and makes all economic decisions
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| Authoritarian | describes a form of government that limits individual freedoms and require strict obedience from their citizens
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| Laissez faire | the doctrine that government generally should not intervene in the marketplace
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| Private property | property that is owned by individuals or companies and not by the government or the people as a whole
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| Mixed economy | a market-based economic system in which the government is involved to some extent
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| Economic transition | a period of change in which a nation moves from one economic's system to another
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| Privatization | the process of selling business or services operated by the government to individual investors, and then allowing them to compare in the marketplace
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| Free enterprise system | an economic system characterized by individual or corporate ownership of capital goods
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| Profit motive | the incentive that drives individuals and business owners to improve their material well-being
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| Open opportunity | the principle that anyone can complete in the marketplace
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| Legal equality | the principle that everyone has the same legal rights
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| Private property rights | the principle that people have the right to control their possessions and use them as they wish
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| Free contract | the principle that people may decide what agreements they want to enter into
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| Voluntary exchange | the principle that people may decide what, when, and how they want to buy and sell
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| Interest group | a private organization that tries to persuade public officials to act in ways that benefit its members
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| Patriotism | love of one's country
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| Eminent domain | a right of a government to take private property for public use
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| Public interest | the concerns of society as a whole
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| Public disclosure laws | laws requiring companies to provide information about their products or services
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| Macroeconomics | the study of economic behavior and decision-making in a nation's whole economy
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| Microeconomics | the study of the economic behavior and decision-making in small units, such as households and firms
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| Gross domestic product | the total value of all final goods and services produced in a country in a given year
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| Business cycle | a period of macroeconomic expansion, or growth, followed by one of contraction, or decline
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| Referendums | a proposed law submitted directly to the public
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| Obsolescence | situation in which older products and processes become out-of-date
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| Patent | a government license that gives the inventor of a new product the exclusive right to produce and sell it
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| Copyright | a government license that grants an author exclusive rights to publish and sell creative works
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| Work ethic | a commitment to the value of work
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| 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
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| Public sector | the part of the economy that involves the transactions of the government
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| Private sector | the part of the economy that involves the transactions of individuals and businesses
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| Infrastructure | the basic facilities that are necessary for a society to function and grow
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| 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
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| Market failure | a situation in which the free market, operating on its own, does not distribute resources efficiently
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| 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
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| Poverty threshold | an income level below that which is needed to support families or households
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| Welfare | government aid to the poor
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| Cash transfers | direct payments of money by the government to poor, disabled, or retired people
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| In-kind benefits | goods and services provided for free or at greatly reduced prices
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| Grant | a financial award given by a government agency to a private individual or group in order to carry out a specific task
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