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Trade-off
sacrificing one good/service to purchase another
Production possibilities curve
graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time
Entrepreneurship
ability of risk-taking individuals to develop new products and start new businesses in order to make profits
Economic growth
to grow and expand the economy
Private property
whatever is owned by individuals rather than by government
Market economy
system in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own and their family’s best interests
Market
freely chosen activity between buyers and sellers of goods and services
Economic model
a theory/simplified representation that helps explain and predict economic behavior
Scarcity
the condition of not being able to have all of the goods and services one wants because wants exceed what can be made from all available resources at any given time
Productivity
the amount of output (goods and services) that results from a given level of inputs (land, labor, capital, entrepreneurship)
Services
actions that can satisfy people’s wants and needs
Laissez-faire
economic system in which the government minimizes its interference with the economy
Command economy
system in which the government controls the factors of production and makes all decisions about their use
Standard of living
government sets safety standards based on economy growth
Profit
money left after all the costs of production; wages, rents, interest, taxes
Profit incentive
when a person invests time, know-how, money, and other capital resources in a business, that investment is made with the idea of making a profit
Traditional economy
system in which economic decisions are based on customs and beliefs that have been handed down from generation to generation
Mixed economy
system combining characteristics of more than one type of economy
Equity
economic equity to exhibit fairness; protected by laws
Adam Smith; Invisible Hand
describes capitalism; an economic system in which private individuals own the factors of production; typically laissez-faire
Factors of production
resources of land, labor, capital, and entrepreneurship used to produce goods and services
Labor
human effort directed toward producing goods and services
Capital
previously manufactured goods used to make other goods and services
Goods
tangible objects that can satisfy people’s wants and needs
Economics
the study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants
