Economics - Unit 1

Vocabulary for unit 1

Goods

Goods

physical objects that someone produces, such as food, clothing, or video games

Services

actions or activities that one person performs for others, such as medical care or haircuts

Scarcity

limited amounts of goods or services are available to meet unlimited wants

Economics

study of how people seek to satisfy their wants and needs by making choices.

factors of production

resources used to make all goods and services; land, labor, capital, entrepreneurship

Land

includes all the natural resources found in nature

Labor

refers to the physical and mental efforts that people contribute to the production of goods and services

Capital

are the human made goods that can be used as resources for further production.

Entrepreneurship

the special talent that some people have for searching out and taking advantage of new business opportunities and for developing new products and new ways of doing things

Trade-offs

act of giving up one benefit in order to gain another, greater benefit

opportunity cost

The second most desirable alternative somebody gives up when making a choice.

cost-benefit analysis

when decision makers compare the sacrifices and gains of a choice.

marginal cost

the cost when adding one more unit, such as sleeping one more hour or doing more homework.

production possibilities frontier (PPF)

graph that shows alternative ways to use an economy’s productive resources.

Efficiency

use of resources in a way that maximizes the output of goods and services.

economic system

structure of methods and principles a society uses to produce and distribute goods and services.

traditional economies

relies on habit, custom or ritual to answer the three economic questions.

Market

any arrangement that allows buyers and sellers to exchange goods and services.

Specialization

concentration of the productive efforts of individuals and businesses on a limited number of activities.

Incentive

the hope for reward or fear of penalty that encourages a person to behave in a certain way.

Competition

struggle among producers for the money of consumers.

Communism

the central government owns and controls all resources and means of production.

Socialism

not a single economic system but a range of economic and political systems based on the belief that wealth should be divided more equally.

Mixed economy

economic system that has some market-based elements and some government involvement; blend of capitalism and socialism.

public good

shared good or service for which it would be impractical to make consumers pay individually or exclude those who didn’t pay.

public sector

part of the economy that involves transactions of the government

private sector

part of the economy that involves transactions between individuals and businesses

Economic Freedom

maximizing individuals’ opportunity to make their own choices

Economic Security

reducing uncertainty. People want to know that the goods and services they want will be available when they want them.  It also means knowing that help (especially from government) is available if people are in need.

Economic Equity

the idea that economic systems are fair.  Different societies and individuals within societies define fairness in different ways.

Economic growth

increasing the amount of goods and services a country can produce.