fundamentals of economics terms
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| need | something that is essential for survival, such as food or medical care
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| want | something that we desire but that i not necessary for survival, such as video games or stylish haircuts
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| goods | physical (tangible) objects that someone produces, such as food, clothing, or video games
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| services | actions of activities (intangible) that one person performs for another, such as a hair cut
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| scarcity | the principle that limited amounts of goods and services are available to meet unlimited wants
- you cannot have an endless supply
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| shortage | occurs when consumers want more of a good or service than producers are willing to make available at a particular price -
- under temporary or long-term circumstances
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| factors of production | the resources used to make all goods or services
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| land | a term that refers to all natural resources used to produce goods and services
- materials found in nature, in , or on the land such as oil, iron, coal, water, and forests
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| labor | a terms that refers to the effort people devote to tasks for which they are paid
- medical care provider, teacher, technician
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| capital | a term that refers to any human-made resources that is used to produce other goods and services
- divided into two types (physical and human)
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| physical captial | human-made objects used to create other goods and services
- also referred to as capital goods
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| human capital | the knowledge and skills a worker gains through education and experiences
- investing in yourself
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| economics | the study of how people seek to satisfy their needs and wants by making choices
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| guns or butter | a term used to describe one of the common choices facing governments: the choice between spending money on military or domestic needs
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| opportunity cost | the most desirable alternative somebody gives up as a result of a decision
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| production possibilities curve | a graph that shows alternative ways to use an economy's productive resources
- points a, b, or and c on guns or butter chart
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| production possibilities frontier | a line that shows combinations of the production of both guns and butter
- connects points a, b, and c, on guns or butter chart
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| efficiency | the use of resources in such a way as 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 | principle that states that as production shifts from making one item to another, more and more resources are necessary to increase production of the second item
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| economic system | the structure of methods and principles a society uses. to produce and distribute goods and services
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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 | relies on habit, custom, or ritual to answer the three basic 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 on 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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| self-interest | somebody's own personal gain
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| competition | the struggle among producers for the dollars of consumers
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| centrally (command) planned economy | an economic system in which the government makes all decisions on the three key economic questions
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| socialism | a range of economic and political systems based on the belief that wealth should be distributed evenly throughout a 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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