ECON VOCAB QUIZ #2

Goods

Physical articles that have been produced for sale or use.

Three examples are food, clothing, and cars.

Services

Work done by someone else for which a consumer, business, or government is willing to pay.

Three examples are teaching, gardening, and childcare.

Shortage

A lack of something that is desired, a condition that occurs when there is less of a good or service available than people want at the current price.

Inputs

The scarce resources that go into the process to produce goods and services.

Factors of Production

The resources used to produce goods and services. Economists define these resources as land, labor, and capital.

Outputs

The goods and services produced using these resources. (land, labor, and capital)

Production Equation

Represents the process of combining resources (inputs) to produce goods and services (outputs).

—> land + labor + capital = goods and services

Entrepreneurship

The willingness and ability to take the risks involved in starting and managing a business.

Entrepreneurs

Assemble the other inputs to create new goods and services.

Land

All of the "gifts of nature" that are used to produce goods and services. (Air, soil, minerals, water, forests, animals, birds, and fish.)

Perpetual Resources

Natural resources like sunlight and wind that are both widely available and in no danger of being used up.

Renewable Resources

Natural assets like forests, fresh water, and fish, with careful planning, can be replaced as they are used.

Nonrenewable Resources

Natural assets (fossil fuels) like oil, coal, and natural gas are finite. Once they are used, they are gone forever.

Labor

The time and effort people devote to producing goods and services in exchange for wages.

Human Capital

The knowledge and skill people gain from education, on-the-job training, and other experiences.

Correlation

A relationship between two variables that tend to change together.

Financial Capital

The money that could be invested in stocks, bonds, real estate, or businesses to produce business wealth.

Physical Capital / Capital Goods

Concrete productive resources made by human-made assets (tools, machines, and factory buildings) that are used to produce other goods and services.

Capital

The tools, machines, and buildings used to produce goods and services.

Productivity

A measure of the efficiency with which goods and services are produced.

Utility

The satisfaction or pleasure one gains from consuming a product or service or from taking an action.

Opportunity Cost

The value of the next best alternative that is given up when making a choice. This is the measure of what you must give up to get what you most want.

Marginal Utility

The extra satisfaction or pleasure you will get from an increase of an additional unit of a good or service.

Negative Utility

A marginal utility where consuming more of something causes more harm than good.

Law of Diminishing Marginal Utility

As the quantity of a good consumed increases, the marginal utility of each additional unit decreases.

Production Possibilities Frontier (PPF)

A simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available.

Production Possibilities Curve (PPC)

A line that represents the best the economy can do with its current factors of production.

Economic Efficiency

The result of using resources in a way that produces the maximum amount of goods and services.