ECONOMICS

unit one BAILEY tERMS

incentive

something that motivates a person to take a particular course of action

economics

the study of how people choose to use their limited resources to satisfy their unlimited wants

scarcity

the condition that results because people have limited resources but unlimited wants

tradeoff

the exchange of one benefit for another that is thought to be better

cost-benefit analysis

a way to compare a cost of an action with the benefits of that action; if benefits exceed costs, then the action is worth taking

future consequences

any choice or decision made today creates results and impacts that extend into the future, not just the present.

opportunity cost

the value of the next best alternative that is given up when making a choice; a measure of what you must give up to get what you want

human capital

the knowledge and skills people gain from education, on-the-job, and other experiences

productivity

the measure of the efficiency with which goods and services are produced, stated as a ratio of output per unit of input

earning power

a business or individual's true capacity to generate consistent profits or income from operations, independent of temporary market spikes or complex financing

for Individuals: It represents your capacity to earn money or generate lifetime income through your skills, labor, and career choices.

entrepreneurship

the willingness and ability to take the risks involved in starting and managing a business

scarcity-forces-tradeoffs principle

the idea that limited resources force people to make choices and face tradeoffs when they choose

no-free-lunch principle.

the idea that every choice involves tradeoffs; a restatement of the scarcity-forces-tradeoffs principle

costs-versus-benefits principle

the idea that people choose something when the benefits of doing so outweigh the costs

incentives-matter principle

the idea that people respond to incentives in generally predictable ways