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Need
Something required for survival (food, water, shelter)
Want
Something you desire but can live without (ex: nice car, new clothes)
Economics
Study of how people use limited resources to satisfy unlimited wants
Scarcity
Limited resources compared to unlimited wants
Shortage
When demand is greater than supply at a certain price
Goods
Physical items you can buy (ex: food, clothes, phone)
Services
Actions performed for someone (ex: haircut, plumbing)
Entrepreneur
Person who combines resources to start a business and take risks
Land
Natural resources used to make goods (ex: trees, water)
Labor
Human effort used to produce goods/services
Physical Capital
Man-made tools used to produce goods (ex: machines)
Human Capital
Skills and knowledge gained through education/experience
Trade-Off
Giving up one thing to gain another
Opportunity Cost
The next best thing you give up when making a decision
Thinking at the Margin
Deciding how much more or less to do
Marginal Cost
Cost of adding one more unit
Marginal Benefit
Benefit of adding one more unit
Traditional Economy
Based on customs, habits, and traditions
Market Economy
Economic decisions made by individuals (buyers & sellers)
Capitalism
Another name for a market economy
Market
Place where buyers and sellers exchange goods/services
Specialization
Focusing on a limited number of tasks to be more efficient
Competition
Rivalry among businesses to attract customers (keeps prices fair and quality high)
Adam Smith
Economist who wrote The Wealth of Nations
The Wealth of Nations
Book explaining how markets work and why they succeed
Self-Interest
Acting in your own best interest
Profit Motive
Desire to earn money that drives decisions
Opportunity Cost Example
Studying vs sleeping → cost of studying = lost sleep
Trade-Off Example
Sleeping late vs better test grade