Economics test #1

Scarcity

condition that results from the combination of limited resources and unlimited wants

Difference between shortage and scarcity

scarcity always exists, shortage means something is temporarily unavailable

Needs

necessary for survival

Wants

something we desire

Tradeoff

all the possible alternatives given up when a decision is made

Opportunity cost

the most desirable alternative we give up when we make a decision (#1 tradeoff)

What does a gun or butter tradeoff mean?

phrase that describes whether governments spend $ on military or civilian goods and services

Is there any such thing as a free lunch?

no (time and efforts are costs as well)

Goods

physical objects such as clothes or shoes

Services

actions or activities that one performs for another

Factors of production

3 groups of resources that are used to make all goods and services

Land

natural resources used to make/provide goods and services

Labor

effort people devote to a task for which they are paid

Physical capital

all human-made goods used to produce other goods or services

Human capital

skills and knowledge gained by a worker through education and experience

Entrepreneur

someone who combines land, labor, and capital to create a new good or service

Thinking at the margin

deciding whether or not to use one more unit of some resource