Economics Ch.1 Section 1 and 2

wants

desires that can be satisfied by consuming a good or service

needs

things such as food, clothing, and furniture that are necessary for survival

scarcity

a situation that exists when there are not enough resources to meet human wants

economics

the study of how individuals and societies satisfy their unlimited wants with limited resources

what are the 3 things economics involves?

1. examining

2. organizing, analyzing, and interpreting data

3. developing theories and economic laws

choice is central to the use of _

scarce resources

goods

physical objects such as food, clothing, and furniture that can be purchased

services

work that one person does for another for payment

consumer

a person who buys goods and services for personal use

producer

a person who makes goods or provides services

what are the 3 economic questions?

1. what will be produced?

2. how will it be produced?

3. for whom will it be produced?

what are the 2 questions that must be addressed when addressing the 3rd economic question?

1. how much should people get?

2. how should their share be delivered to them?

all goods and services are created by?

factors of production

factors of production

the economic resources needed to produce goods and services

what are the 4 factors of production?

1. land

2. labor

3. capital

4. entrepreneurship

land

all the natural resources on or under the ground that are used to produce goods and services

labor

all the human time, effort, and talent used to produce goods and services

capital

all the resources people make and use to produce and distribute goods and services

what are the two types of capital?

physical capital and human capital

human capital

the knowledge and skills gained through experience

entrepreneurship

the combination of vision, skills, ingenuity, and willingness to take risks that is needed to create and run new businesses

what are the 3 things that influence decision making?

1. incentives

2. utility

3. economize

incentives

a benefit offered to encourage people to act in a certain way

utility

the benefit or satisfaction gained from using a good or service

economize

to make decisions according what is believed to be the best combination of costs and benefits

trade-off

the alternative someone gives up when making an economic choice

opportunity cost

the value of something that is given up by choosing one alternative over another

cost-benefit analysis

the practice of examining the costs and the expected benefits of a choice as an aid to decision making

marginal cost

the additional cost of producing or using one more unit of a good or service

marginal benefit

the benefit or satisfaction gained from using one more unit of a good or service