Economics

Chapter 1

Durable good

One that last three years or more when used on a regular basis. Includes robot welders, tractors, and automobiles

Nondurable good

An item that last fewer than three years when used on a regular basis. Includes food, writing paper, and most clothes.

Consumer Good

Goods such as shoes, a shirt, automobile, used final use

Cosnumer good

Tool or good such as machinery or equipment that is used by businesses to produce other products

Scarcity

Condition that results from society not having enough resources to produce all the things people would like to have

Gross Domestic Product

Monetary value of all final goods and structures produced within a 12 month period

Paradox of value

the contradiction that essential goods (like water) have low market prices, while non-essential, luxury goods (like diamonds) have high prices

Value

A term that refers to a worth that can be expressed in dollars or cents

Utility

the pleasure, happiness, or satisfaction derived from consuming goods and services

Wealth

Accumulation of products that are tangible, are scarce, have utility, and are transferable from one person to another

Opportunity Cost

The value of the best alternative given up

Trade-offs

a decision to give up one benefit or quality to gain another

Human capital

The sum of people’s skills, abilities, health, knowledge, and motivation

Division of Labor

Organizing work is a way of organizing work so that each worker or work group completes a separate part of the overall task

Factor markets

Where entrepreneurs hire labor for wages and salaries, acquire land in return for rent

Cost-benefit analysis

A way of comparing the benefits of an action to the expected costs

Free Enterprise Economy

One in which consumes and privately owned businesses rather than the government

Standard of living

Our quality of life based on the ownership of necessities and luxuries that make life easier.

Circular flow of economic activity

a simplified economic diagram showing how money, goods, and services move between households (consumers) and businesses (firms) in a continuous loop.