Chapter 1 Vocabulary: What Is Economics

Scarcity - fundamental economic problem facing all societies resulting from a combination of few resources and people’s virtually unlimited needs and wants

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

Need - 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

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

Consumer Good - good intended for final use by consumers rather than businesses

Capital Good - tool, equipment, or other

Service - work or labor performed for someone economic product that includes haircuts, home repairs, and forms of entertainment

Value - monetary worth of a good or service as determined by the market

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; excludes services

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

Factors of Production - productive resources needed to produce goods; the four factors are land, capital, labor, and entrepreneurship

Land - natural resources or "gifts of nature" not created by human effort, one of the four factors of production

Capital - tools, equipment, and factories used in the production of goods and services, one of the four factors of production

Labor - people with all their abilities and efforts; one of the four factors of production; does not include the entrepreneur

Entrepreneurs - risk-taking individuals who introduce new products or services in search of profits; one of the four factors of production

Production Possibilities Curve - diagram representing all possible combinations of goods and/or services an economy can produce when all productive resources are fully employed

Opportunity Cost - cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Trade-offs - alternative that must be given up when one choice is made rather than another

Consumerism - a social movement that was aimed at promoting the interests of consumers

Economic Growth - increase in a nation's total output of goods and services over time

Productivity - measure of the amount of output produced in a specific time period with a given amount of resources; normally refers to labor, but can apply to all factors of production

Human Capital - sum of people's skills, abilities, health, and motivation

Division of Labor - division of work into a number of separate tasks to be performed by different workers

Specialization - assignment of tasks to the workers, factories, regions, or nations that can perform them most efficiently

Economic Interdependence - mutual dependence of the economic activities of one person, company, region, or nation on those of another person, company, region, or nation

Market - meeting place or mechanism through which buyers and sellers of an economic product come together; may be local, regional, national, or global

Factor Market - markets in which productive resources are bought and sold

Product Markets - markets in which goods and services are bought and sold

Economic Model - simplified version of a complex concept or behavior expressed in the form of a graph, figure, equation, or diagram

Cost-Benefit Analysis - comparison of the cost of an action to its benefits

Free Enterprise Economy - market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention

Standard of Living - quality of life based on ownership of necessities and luxuries that make life easier