Economics Vocabulary Review (Pages 1-4)

Vocabulary flashcards covering key economic terms from Pages 1-4.

Economics

The study of how people use limited resources to satisfy unlimited wants; the science of scarcity, choice, and optimization.

Goods

Tangible items that satisfy wants and can be bought or sold.

Services

Intangible activities that satisfy wants or needs and are purchased.

Scarcity

A fundamental economic problem: limited resources to meet unlimited wants.

Need

Something essential for survival (basic requirement for living).

Want

A desire for goods or services that is not essential for survival.

Shortage

A temporary lack of a good or service at a given price; can be resolved by price changes or production adjustments.

Factors of Production

Resources used to produce goods and services: Land, Labor, and Capital.

Land

Natural resources used in production (soil, minerals, water, air, climate).

Labor

People’s physical and mental effort used to produce goods and services.

Capital

Man-made resources used to produce goods and services; includes tools, equipment, and facilities.

Physical Capital

Tangible assets used in production, such as machinery, buildings, and equipment.

Human Capital

The knowledge, skills, and experience possessed by workers.

Entrepreneur

A person who organizes and operates a business, taking on financial risks to earn profits.

Trade-off

Choosing one option requires giving up another; the alternative forgone.

Guns or Butter

A classic trade-off between a nation’s defense spending (guns) and civilian goods (butter).

Opportunity Cost

The value of the next-best alternative forgone when a choice is made.

Thinking at the Margin

Evaluating the additional benefits and costs of consuming or producing one more unit.

Production Possibilities Curve

A graph showing the maximum possible output combinations of two goods with given resources and technology; points on the curve are efficient.

Production Possibilities Frontier

The boundary of the production possibilities curve; the maximum feasible combinations of two goods.

Efficiency

Using resources in a way that maximizes output and minimizes waste.

Underutilization

Using resources below their full potential, producing inside the production possibilities frontier.

Cost

The value of resources sacrificed to obtain something; includes both price and opportunity costs.

Law of Increasing Costs

As production of a good expands, the opportunity cost of producing additional units rises because resources are not perfectly adaptable to the production of that good.