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scarcity
fundamental economic problem facing all societies that results from a combination of scarce resources and people’s virtually unlimited wants
economics
social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources
need
basic requirement for survival; includes food, clothing, and/or shelter
want
way of expressing or communicating a need; a broader classification than needs
factors of production
productive resources that make up the four categories of land, capital, labor, and entrepreneurship
land
natural resources or “gifts of nature” not created by human effort; one of the four factors of production
capital
tools, equipment, and factories used in the production of goods and services; one of four factors of production
financial capital
money used to buy the tools and equipment used in production
labor
people with all their abilities and efforts; one of the four factors of production, does not include the entrepreneur
entrepreneur
risk-taking individual in search of profits; one of four factors of production
production
process of creating goods and services with the combined use of land, capital, labor, and entrepreneurship
Gross Domestic Product (GDP)
dollar value of all final goods, services, and structures produced within a country’s national borders during a one-year period
economic product
good or service that is useful, relatively scarce, and transferable to others
good
tangible economic product that is useful, relatively scarce, transferable to others; used to satisfy wants and needs
consumer good
good intended for final use by consumers rather than businesses
capital good
tool, equipment, or other manufactured good used to produce other goods and services; a factor of production
service
work or labor performed for someone; economic product that includes haircuts, home repairs, forms of entertainment
value
worth of a good or service as determined by the market
paradox of value
apparent contradiction between the high value of nonessentials and low value of essentials
utility
ability or capacity of a good or service to be useful and give satisfaction to someone
wealth
sum of tangible economic goods that are scarce, useful, and transferable from one person to another; excludes services
market
meeting place or mechanism allowing buyers and sellers of an economic product to come together; may be local, regional, national, or global
factor market
market where productive resources are bought and sold
product market
market where goods and services are offered for sale
economic growth
sustained period during which a nation’s total output of goods and services increases
productivity
degree to which productive resources are used efficiently; normally refers to labor, but can apply to all factors of production
division of labor
division of work into a number of separate tasks to be performed by different workers; same as specialization
specialization
assignment of tasks so that each worker performs fewer functions more frequently; same as division of labor
human capital
sum of peoples’ skills, abilities, health, and motivation
economic interdependence
economic activities in one part of the country or world affect what happens elsewhere
trade-off
alternative that must be given up when one is chosen rather than another
opportunity cost
cost of the next best alternative use of money, time, or resources when one choice is made rather than another
production possibilities frontier
diagram representing maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed
cost-benefit analysis
way of thinking that compares the cost of an action to its benefits
free enterprise economy
market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention; same as private enterprise economy
standard of living
quality of life based on ownership of necessities and luxuries that make life easier
