Etikerenste Econ Chapter 1 Terms

Chapters 1-3. I'm gonna fail this exam

scarcity

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