Economics Unit 1 Study Guide Flashcards

Vocabulary flashcards generated from Economics Unit 1 Study Guide covering key economic concepts, systems, market principles, and production decision models.

Factors of Production

The essential resources used to produce goods and services, categorized into land, labor, capital, and entrepreneurship.

Entrepreneurship

The process of combining land, labor, and capital to create new goods or services, motivated primarily by profit, innovation, and independence.

Scarcity

The fundamental economic problem of having unlimited human wants and needs in a world of limited resources.

Implicit Cost

An opportunity cost that occurs when a firm or individual uses internal resources without making a direct cash outlay.

Opportunity Cost

The value of the next best alternative given up when a choice is made.

Trade-off

An alternative sacrificed whenever one course of action or decision is chosen over another.

Rational Decision

A choice made when the marginal benefit of an action is greater than or equal to its marginal cost.

Microeconomics

The branch of economics that studies the behavior and decision-making of small economic units, such as individuals, households, and individual businesses.

Macroeconomics

The branch of economics that studies overall, large-scale economic factors, such as inflation, national output, and total employment.

Thinking at the Margin

Analyzing decisions by evaluating the small incremental costs and benefits of adding or subtracting one additional unit.

Marginal Cost

The additional cost incurred from producing or consuming one more unit of a good or service.

Marginal Benefit

The additional gain or satisfaction received from producing or consuming one extra unit of a good or service.

Role of Government in a Mixed Economy

Regulating markets, enforcing contracts, protecting property rights, providing public goods, and addressing externalities while allowing private business ownership.

Role of Government in a Centrally Planned Economy

Controlling and making all decisions regarding the production, allocation, and pricing of goods and services.

Free Market Economy

An economic system based on supply and demand with little to no government control or intervention.

Mixed Market Economy

An economic system that combines private enterprise and free market principles with government intervention and regulation.

Centrally Planned Economy

An economic system in which a central authority, typically the government, controls the factors of production and makes all key economic decisions.

Public Goods and Services

Non-excludable and non-rivalrous goods and services provided by the government for communal use, such as national defense or public parks.

Positive Externality

A beneficial side effect or spillover benefit experienced by a third party as a result of an economic activity.

Negative Externality

A harmful side effect or cost imposed on an uninvolved third party as a result of an economic transaction or production process.

Anti-Trust Laws

Government legislation designed to prevent monopolies, promote competition, and prohibit unfair business practices.

Economic Growth

An increase in the total amount of goods and services produced by an economy over a given period, often achieved through improvements in technology, trade, capital, or labor supply.

Production Possibilities Curve (PPC)

A graph that shows the maximum combination of two goods or services that can be produced using available resources efficiently.

Underutilization

The inefficient use of available resources, represented by any point inside the Production Possibilities Curve.

Production Possibilities Frontier (PPF)

The boundary or curve line on a PPC showing the maximum possible production levels when all resources are fully and efficiently employed.