Unit 1 Vocabulary

economics

a social science concerned with how resources are used to satisfy people’s wants

scarcity

limited resources for production relative to wants for goods and services

efficency

to obtain the greatest output possible with limited resources

free goods

any good you can have an unlimited amount of without having to sacrifice anything

factors of production

resources used to produce goods and services

land

any natural resource

labor

any human resource

capital

a produced factor of production used to produce other goods and services

physical capital

machinery, factories, etc.

human capital

increase in labor productivity from acquired skills and the development of people’s abilities

financial capital

money; not viewed as a real factor of production

trade-offs

a choice between alternative uses of a given quantity of a resource

opportunity costs

the value of the best alternative not chosen

production possibilities frontier

used to illustrate the impact of scarcity on an economy

market economy

an economic system in which the basic economic questions of what, how, and for whom to produce are resolved primarily by buyers and sellers interacting in markets

centrally directed (command) economy

an economic system in which the basic economic questions are resolved by the government

mixed economy

an economic system in which the basic economic questions are resolved by a mixture of market, command, and traditional