Unit 4 vocab

1.     economics (p. 3) The study of how people choose to use their limited resources to satisfy their unlimited wants

2.     economy (p. 3)  A system used to manage limited resources for the production, distribution, and consumption of goods and services

3.     positive economics (p. 6)  the branch of economics that uses objective analysis to find out how the economy actually works

4.     normative economics (p. 6)  the branch of economics that applies value judgments to data in order to recommend actions or policies. The goal is to advise how things ought to be done.

5.     scarcity (p. 6) the condition that results because people have limited resources but unlimited wants

6.     tradeoff (p. 6) the exchange of one benefit or advantage for another that is thought to be better

7.     cost-benefit analysis (p. 7)  a way to compare the costs of an action with the benefits of that action; if benefits exceed costs, then the action is worth taking

8.     incentive (p. 8)  something that motivates a person to take a particular course of action

9.     goods (p. 21)  a physical article that has been produced for sale or use

10. services (p. 21)  work done by someone else for which a consumer, business, or government is willing to pay

11. factors of production (p. 22)  the resources used to produce goods and services. Economists define these resources as land, labor, and capital

12. entrepreneurship (p. 22)  the willingness and ability to take the risks involved in starting and managing a business

13. capital (p. 25)  the tools, machines, and buildings used to produce goods and services

14. productivity (p. 26) a measure of the efficiency with which goods and services are produced, stated as a ratio of output per unit of input

15. opportunity cost (p. 27) the value of the next best alternative that is given up when making a choice; a measure of what you must give up to get what you want

16. production possibilities frontier (p. 30)  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

17. economic equity (p. 40)  the fairness with which an economy distributes its resources and wealth

18. economic system (p. 41)  a society’s way of coordinating the production and consumption of goods and services

19. traditional economy (p. 41) an economic system in which decisions about production and consumption are based on custom and tradition

20. command economy (p. 42)  an economic system in which decisions about production and consumption are made by a powerful ruler or government

21. market economy (p. 43) an economic system in which economic decisions are left up to individual producers and consumers

22. factor payment (p. 44)  income earned when an individual sells or rents a factor of production that he or she owns; for example, wages are a factor payment made to workers in exchange for their labor

23. mixed economy (p. 47) an economic system in which both the government and individuals play important roles in production and consumption; most modern economies are mixed economies

24. free enterprise system (p. 50)  an economic system in which the means of production are mostly privately owned and operated for profit