Chp 1 + 2

Need

A good or service that is essential for people's living

Want

A good or service which people want to have, not essential

Economic problem

When wants exceed the resource available to make scarcity

Scarcity

when there are unlimited wants but limited resources

Factors of Production (4)

Land, labor, capital, enterprise

Opportunity cost

The next best alternative choice given up as another was chosen

Specialization

When workers specialize in one task which they do, best at

Division of labor

When labor force is divided into sections in which people at those sections are specialized in one particular job

Purpose of business activity

Combine 4 factors of production and make products/services

Added value

Selling price - cost of making products

Primary sector

Where people extract natural resources from earth and turn them into raw materials

Secondary sector

Turn raw materials into products

Tertiary sector

Provide services to customers and sell products

De-industrialization

Decline of importance for secondary sector

Mixed economy

Has private and public sector businesses

Capital

Money (invested into a business)