Module 1 Vocabulary - Economics

Land

"Gifts of Nature" that can be used to produce goods and services; for example water, mineral deposits, forests, and actual fields. Also referred to as natural resources.

resources

What is used to produce goods and services; the basic resources include land or natural resources, capital, labor or human resources, and entrepreneurship.

labor

The quantity and quality (skills, knowledge, and physical health) of human efforts available to produce goods and services.

macroeconomics

the study of economics concerned with the economy as a whole.

wants

Desires that can be satisfied by consuming a good or service; not a basic need.

economics

The study of how people, firms, and societies choose to allocate scarce resources with alternative uses.

capital

Goods made and used to produce other goods and services, for example, buildings, tools, and equipment.

allocate

Apportion or distribute.

scarcity

The condition that exists because human wants exceed the capacity of available resources to satisfy those wants.

needs

food, water, clothing, and shelter

entrepreneurship

Human resources that assume the risk of organizing the other factors of production to produce goods and services.

marginal cost

The increase in a producer's total cost when it increases its output by one unit.

marginal benefit

The additional gain from consuming or producing one more unit of a good or service; can be measured in dollars or satisfaction.

marginal analysis

A decision-making tool for comparing the additional or marginal benefits of a course of action to the additional or marginal cost.

opportunity cost

The second-best alternative (or the value of that alternative) that must be given up when scarce resources are used for one purpose instead of another.

Production Possibilities Frontier

A table or graph that shows the full employment capacity of an economy in the form of possible combinations of two goods, or two bundles of goods, that could be produced with a given amount of productive resources and level of technology.

Laissez-faire

French term meaning "leave it alone"; the idea that government should have a limited role in a free market economy and should allow market forces to set prices and allocate resources.

mixed economy

An economy having elements of both market and command features.

land/natural resources

Gifts of nature that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests, and actual fields of land. When investments are made to improve fields of land or other natural resources, those resources become, in part, capital resources.

command economic system

An economy in which most economic issues of production and distribution are resolved through central planning and control; government answers the basic economic questions.

traditional economic system

An economy in which customs and habits from the past are used to resolve most economic issues of production and distribution.

free market

Economic system in which individuals own the factors of production and answer the basic economic questions.

invisible hand

A figure of speech representing the idea that firms and individuals making decisions in their own self-interest will at the same time create economic order and promote society's interests; coined by Adam Smith.