Intro to economics

need

something like air, food, or shelter that is necessary for survival; ex. drinking water or "basic" medical

want

an item that we desire but that is not essential to survival; ex. jewelry or massage

economics

the study of how people seek to satisfy their needs and wants by making choices; "the study of choice"; importance = to predict trends in the future for the majority of the people

goods

physical objects such as clothes or shoes; created by the producer

services

actions or activities that one person performs for another; created by the producer

scarcity

Limited quantities of resources to meet unlimited wants

shortage

a situation in which a good or service is unavailable; unlike scarcity, this may be short term or long term

factors of production

three groups of resources that are used to make all goods and services; land, labor, and capital; controlled by the consumer

land

natural resources that are used to make goods and services; ex. water, oil, wind, timber

labor

the effort that people devote to a task for which they are paid

capital

any human-made resource that is used to create other goods and services

physical capital (capital goods)

all human-made goods that are used to produce other goods and services; ex. tools, machines, buildings

economic system

the method used by a society to produce and distribute goods and services; ex. free market, centrally planned, mixed

Consumer

A person who purchases goods and services for personal use

Producer

A person, company, or country that makes, grows, or supplies goods or commodities for sale

Entrepreneurship

the process of starting, organizing, managing, and assuming the responsibility for a business

scarce resources

insufficient time, money, or other resources for individuals to satisfy all their desires

Centrally planned economy

An economic system in which the government controls a country's economy.

mixed economy

an economic system combining private and public enterprise.

free market economy

an economic system based on supply and demand with little or no government intervention.

Macro economics

the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

Micro economics

the part of economics concerned with single factors and the effects of individual decisions.

Karl Marx

19th century philosopher, political economist, sociologist, humanist, political theorist, and revolutionary. Often recognized as the father of communism. Analysis of history led to his belief that communism would replace capitalism. Believed in a classless society.

invisible hand

a term coined by Adam Smith to describe the self-regulating nature of the marketplace

opportunity cost

the next best alternative forgone when an economic decision is made

circular flow of income diagram

a visual model of the economy that shows how dollars flow through markets among households and firms

production possibilities curve

A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.

PPC-area outside of the curve

impossible to attain without added inputs

PPC-area inside the curve

possible, but shows inefficiency in the process

economic incentives

economic policies that motivate you to engage in certain behavior because they are the path towards achieving your preferences, such as wealth

Utility

the amount of satisfaction a person receives from the consumption of a particular product or service

economize

spend less; reduce one's expenses

Trade-off

an alternative that we sacrifice when we make a decision