Unit 1

scarcity

fundamental economic problem of meeting people’s virtually unlimited needs and wants with scarce resources

economics

social science dealing with how people satisfy seemingly unlimited and competing needs and wants with the careful use of scarce resources

need

basic requirement for survival, including food, clothing, and shelter

want

something we would like to have but is not necessary for survival

good

tangible economic product that is useful, transferable to others, and used to satisfy wants and needs

durable good

good that lasts for at least three years when used regularly

consumer good

good intended for final use by consumers other than businesses

nondurable good

item that wears out, is used up, or lasts for fewer than three years when used regularly

capital good

tool, equipment, or other manufactured good used to produce other goods and services

service

a factor of production service work or labor performed for someone; economic product that includes haircuts, home repairs, and forms of entertainment

value

a factor of production service work or labor performed for someone

paradox of value

apparent contradiction between the high value of a nonessential item and the low value of an essential item

utility

ability or capacity of a good or service to be useful and give satisfaction to someone

wealth

sum of tangible economic goods that are scarce, useful, and transferable from one person to another

gross domestic product (GDP)

monetary value of all final goods, services, and structures produced within a country’s national borders during a one-year period

traditional economy

economic system in which the allocation of scarce resources and other economic activity is the result of ritual, habit, or custom

economic system

organized way a society provides for the wants and needs of its people

command economy

economic system characterized by a central authority that makes most of the major economic decisions

Socialism

economic system in which government owns some factors of production and has a role in deciding what and how goods are produced

Market

meeting place or arrangement through which buyers and sellers interact to determine price and quantity of an economic product; may be local, regional, national, or global

market economy

economic system in which supply, demand, and the price system help people allocate resources and make the WHAT, HOW, and FOR WHOM to produce decisions; same as free enterprise economy

capitalism

economic system in which private citizens own and use the factors of production in order to generate profit