Studied by 1 personscarcity
a condition facing all societies because there are not enough productive resources to satisfy people’s unlimited wants
productive resources
the inputs used to produce the goods and services that people want
economics
the study of how people use their scarce resources to satisfy their unlimited wants
human resources
the broad category of human efforts, both physical and mental, used to produce goods and services
labor
the physical and mental effort used to produce goods and services
entrepreneur
a profit-seeker who develops a new product or process and assumes the risk of profit or loss
natural resources
so-called “gifts of nature” used to produce goods and services, includes both renewable and exhaustible resources
capital goods
all human creations used to produce goods and services; for example, factories, trucks, and machines
good
an item you can see, feel, and touch that requires scarce resources to produce and satisfies human wants
service
something not physical that requires scarce resources to produce and satisfies human wants
economic theory
a simplification of economic reality used to make predictions about the real world
marginal
incremental, additional, extra, or one more; refers to a change in an economic variable, a change in the status quo
microeconomics
study of economic behaviors in particular markets, such as the market for computers or for unskilled labor
macroeconomics
study of the economic behavior of the economy as a whole, especially the national economy
markets
the means by which buyers and sellers carry out exchange
opportunity cost
the value of the best alternative passed up for the chosen item or activity
sunk cost
a cost you have already paid and cannot recover, regardless of what you do now
economic system
the set of mechanisms and institutions that resolves the what, how, and for whom questions for an economy
pure market economy
an economic system with no government so that private firms account for all production
pure command economy
an economic system in which all resources are government-owned and all production is directed by the central plans of government
mixed economy
an economic system that mixes central planning with competitive markets
market economy
describes the U.S. economic system, where markets play a relatively large role
transitional economy
an economic system in the process of shifting from central planning to competitive markets
traditional economy
an economic system shaped largely by custom or religion
production possibilities frontier (PPF)
shows the possible combination of two types of goods that can be produced when available resources are employed efficiently
efficiency
producing the maximum possible output from available output from available resources, meaning the economy cannot produce more of one good without producing less of the other good
law of increasing opportunity cost
each additional increment of one good requires the economy to give up successively larger increments of the other good
economic growth
an expansion of the economy’s production possibilities, or ability to produce
rules of the game
the laws, customs, manners, conventions, and other institutional underpinnings that encourage people to pursue productive activity
absolute advantage
the ability to make something using fewer resources than other producers require
law of comparative advantage
the worker, firm, region, or country with the lowest opportunity cost of producing an output should specialize in that output
specialization
occurs when individual workers focus on single tasks, enabling each worker to become more efficient and productive
barter
a system of exchange in which products are traded directly from other products
money
anything that everyone is willing to accept in exchange for goods and services
division of labor
organizes the production process so that each worker specializes in a separate task
household
the most important economic decision maker, consisting of all those who live together under one roof
utility
a household’s level of satisfaction, happiness, or sense of well-being
firm
a business unit or enterprise formed by a profit-seeking entrepreneur who combines resources to produce goods and services
Industrial Revolution
development of large-scale production during the eighteenth century
private property rights
legal claim that guarantees an owner the right to use a resource or to charge others for its use
antitrust laws
laws that reduce anticompetitive behavior and promote competition in markets where competition is desirable
natural monopoly
one firm that can serve the entire market at a lower per-unit cost than two or more firms can
fiscal policy
the federal government’s use of taxing and public spending to influence the macroeconomy
monetary policy
the Federal Reserve System’s attempts to control the money supply to influence the macroeconomy
private goods
goods with two features: 1) the amount consumed by one person is unavailable to others, and 2) nonpayers can easily be excluded
public goods
goods that, once produced, are available to all, but the producer cannot easily exclude nonpayers
open-access goods
goods that are rival in consumption but exclusion is costly
negative externalities
by-products of production or consumption that impose costs on third parties
positive externalities
by-products of consumption or production that benefit third parties
median income
the middle income when a group of incomes is ranked from lowest to highest
social insurance
cash transfers for retirees, the unemployed, and others with a work history and a record of contributing to the program
income-assistance programs
government programs that provide money and in-kind assistance to poor people
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