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Scarcity

Limited resources but unlimited wants

Shortage

Temporary lack of a good or service

Need

Something required to survive

Want

Something that improves quality of life

Trade-off

Giving up one thing to get another

Opportunity Cost

The best alternative you give up

Cost-Benefit Analysis

Comparing costs and benefits before deciding

Incentive

Reward or penalty that influences behavior

Rational Self-Interest

Making choices that benefit yourself

Marginal Decision-Making

Deciding based on additional costs and benefits

Voluntary Exchange

Trade where both sides benefit

Consumer

Person who buys goods and services

Producer

Person or business that makes goods or services

Entrepreneur

Person who takes risks to start a business

Land

Natural resources used to produce goods

Labor

Physical and mental work for wages

Capital

Tools used to produce goods

Physical Capital

Man-made tools and machines

Human Capital

Skills and knowledge of workers

Entrepreneurship

Organizing resources and taking risks

Investment

Buying capital goods to produce more

Productivity

Amount produced per worker

Division of Labor

Splitting tasks to increase efficiency

Specialization

Focusing on one task or skill

Market Economy

Consumers and businesses make decisions

Command Economy

Government makes all economic decisions

Mixed Economy

Market system with government involvement

Traditional Economy

Decisions based on customs and traditions

Private Property

Individuals own resources

Competition

Businesses compete for customers

Profit Motive

Desire to earn money

Price Signal

Prices show scarcity and demand

Externality

Side effect that affects others

Positive Externality

Benefit to others

Negative Externality

Cost to others

Efficiency

Using resources wisely

Equity

Fairness and equal opportunity

Security

Protection from economic risks

Freedom

Ability to make economic choices

Growth and Innovation

New ideas and higher standard of living