Microeconomics Unit 1 Vocab Quiz 1 Fundamentals of Economics

scarcity

Scarcity

Condition where wants exceed the ability of resources to satisfy them.

Trade-off

Giving up something to have something else.

Factors of Production

Scarce resources including land, labor, capital, and entrepreneurial ability.

Land

All natural resources used in producing goods and services.

Labor

Effort a person devotes to a task for which they are paid.

Capital

Human-made resource used to create other goods and services.

Entrepreneurial Ability

Leaders combining factors of production to create goods and services.

Economic System

Method a society uses to produce and distribute goods and services.

Command Economy

Government owns resources and answers basic economic questions.

Market Economy

Individuals and firms answer economic questions with private property.

Resource (Factor) Market

Where resources are sold to firms.

Product Market

Where goods and services produced by businesses are sold to households.

Opportunity Cost

Loss of benefit from choosing an alternative.

Production Possibilities Curve

Model showing alternative uses of scarce resources.

Absolute Advantage

Ability to produce more than another with the same resources.

Comparative Advantage

Ability to produce at a lower opportunity cost than another.

Specialization

Focusing production on select goods to increase efficiency.

Terms of Trade

Agreed conditions benefiting both countries in trade.

Explicit Costs

Costs involving actual money outlay.

Implicit Costs

Costs not requiring money outlay, measured by foregone benefits' value.

Marginal Analysis

Making decisions based on incremental changes.

Utility

Measure of personal satisfaction for a consumer.