Economics Vocab Ch. 1, 2, 3, 4, 10

need
something like air, food, or shelter that is necessary for survival
want
an item that we desire but that is not necessary for survival
economics
the study of how people seek to satisfy their needs and wants by making choices
goods
physical objects such as clothes or shoes
services
actions or activities that one person performs for another
scarcity
limited quantities of resources to meet unlimited wants
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shortage
a situation in whicha ggod or service is unavailable
factors of production
land, labor, and capital; the three groups of resources that are used to make all goods and services
land
natural resources that are used to make goods and services
labor
the effort that people devote to a task for which they are paid
capital
any human-made resource that is used to create other goods and services
physical capital
all human-made goods that are used to produce other goods and services
human capital
the skills and knowledge gained by a worker through education and experience
entrepreneur
ambitious leader who combines land, labor and capital to create and market new goods and services
trade-off
an alternative that we sacrifice when we make a decision
guns or butter
a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods
opportunity cost
the most desirable alternative given up as the result of a decision
thinking at the margin
deciding whether to do or use one additional unit of some resource
production possibilities curve/graph
a graph that shows alternative ways to use an economy’s resources
production possibilities frontier
the line on a production possibilities graph that shows the maximum possible output
efficiency
using resources in such a way as to maximize the production of goods and services
underutilization
using fewer resources than an economy is capable of using
cost
to an economist, the alternative that is given up because of a decision
law of increasing cost
law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
economic system
the method used by a society to produce and distribute goods and services
factor payments
the income people recieve for supplying factors of production, such as land, labor, or capital
patriotism
the love of one’s country; the passion that inspires a person to serve his or her country
safety net
government programs that protect people experiencing unfavorable economic conditions
standard of living
level of economic prosperity
traditional economy
economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
market economy
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
centrally planned economy
economic system in which the central government makes all decisions on the production and consumption of goods and services
command economy
economic system in which a central authority is in command of the economy; a centrally planned economy
mixed economy
market-based economic system with limited government involvement
market
an arrangement that allows buyers and sellers to exchange things
specialization
the concentration of the productive efforts of individuals and firms on a limited number of activities
household
a person or groupof people living in the same residence
firm
an organization that uses resources to produce a product, which it then sells
factor market
market in which firms purchase the factors of production from households
profit
the financial gain made in a transaction
product market
the market in which households purchase the goods and services that firms produce
self-interest
one’s own personal gain
incentive
an expectation that encourages people to behave in a certain way
competition
the struggle among producers for the dollars of consumers
invisible hand
term economists use to describe the self-regulating nature of the marketplace
consumer sovereignty
the power of consumers to decide what gets produced
socialism
a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout society
communism
a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
authoritarian
requiring strict obedience to an authority, such as a dictator
collective
large farm leased from the state to groups of peasant farmers
heavy industry
industry that requires a large capital investment and that produces items used in other industries
laissez faire
the doctrine that states that government generally should not intervene in the marketplace
private property
property owned by individuals or companies, not by the governmetn or the people as a whole
free enterprise
an economic system characterized by private or corporate ownershipof captal goods; investments that are determined by private decision reather than by state control; and determined in a free market
continuum
a range with no clear divisions
transition
period of change in which an economy moves away from a centrally planned economy toward a market-based system
privatize
to sell state-run firms to individuals
profit motive
the force that encouprages people and organizations to improve their material well-being
open opportunity
the concept that everyone can compete in the marketplace
private property rights
the concept that people have the rihgt and privilege to control their possessions as the wish
free contract
the concept that people may decide what agreements the want to enter into
voluntary exchange
the concept that people may decide what and when they want to sell
competition
the rivalry among sellers to attract customers while lowering costs
interest group
a private organization that tries to persusade public officials to act or vote according to group members’ interests
public disclosure laws
laws requiring companies to provide full information about their products
public interest
the concerns of the public as a whole
legal equality
the concept of giving everyone the same legal rights