Ch. 1 Vocab

scarcity

the limited nature of society's resources, given society's unlimited wants and needs

economics

the study of how individuals and societies satisfy their unlimited wants with limited resources

macroeconomics

the study of the overall aspects and workings of an economy

incentives

factors that motivate a person to act or exert effort

opportunity cost

the highest-valued alternative that must be sacrificed in order to get something else

economic thinking

requires a purposeful evaluation of the available opportunities to make the best decision possible

marginal thinking

requires decision-makers to evaluate whether the benefit of one more unit of something is greater than its cost

markets

brings buyers and sellers together to exchange goods and services

circular flow diagram

shows how goods, services, and resources flow through the economy

trade

the voluntary exchange of goods and services between two or more parties

comparative advantage

the situation where an individual, business, or country can produce at a lower opportunity cost than a competitor can