Economics - Ch. 1 Vocab

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