scarcity
the condition that results from society not having enough resources to produce things people want
economics
The study of how people seek to satisfy their needs and wants by making choices
need
Basic requirement for survival
want
an item that we desire but that is not essential to survival
durable good
a good that lasts for at least three years when used regularly
nondurable goods
an item that lasts for fewer than three years when used on a regular basis
consumer good
good intended for final use by consumers rather than businesses
Capital good
tool, equipment, or other manufactured good used to produce other goods and services; a factor of production
service
work that is performed for someone
paradox of value
apparent contradiction between the high value of a nonessential item and the low value of an essential item
utlity
how useful it is and provide satisfaction
wealth
the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another
intangible
unable to be touched or grasped; not having physical presence
Gross Domestic Product (GDP)
The monetary value of all the finished goods and services produced within a country's borders in a specific time period
the scope of economics
description, analysis, explanation, prediction
factors of production
resources use to produce goods (land, capital, labor, and entrepreneurs)
land
all natural resources used to produce goods and services
capital
the tools, equipment, machinery, and factories used in the production of goods and services
labor
Human effort directed toward producing goods and services
Entrepreneur
A person who organizes, manages, and takes on the risks of a business.
production possibilities curve
a graph that shows alternative ways to use an economy's productive resources
opportunity cost
the most desirable alternative given up as the result of a decision
consumers rights
right to safety right to be informedright to chooseright to be heardright to redress
consumerism
a movement advocating greater protection of the interests of consumers
economic growth
when a nation's total output of goods and services increases over time
productivity
A measure of the goods and services produced within a particular country.
human capital
the skills and knowledge gained by a worker through education and experience
division of labor
Division of work into a number of separate tasks to be performed by different workers
speciallization
when factories do something better or more efficient than others
economic interdependence
a reliance on others, as they rely on you, to provide goods and services to be consumed
markets
Bring buyers and sellers together to exchange goods and services
factor markets
where resources, especially capital and labor, are bought and sold
product market
the market in which households purchase the goods and services that firms produce
cost-benefit analysis
a decision-making process in which you compare what you will sacrifice and gain by a specific action
free enterprise economy
market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention
Traditional Economy
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
command economy
an economy in which production, investment, prices, and incomes are determined centrally by a government.
socialism
A system in which society, usually in the form of the government, owns and controls the means of production.
Advantages of traditional economy
-sets forth certain economic roles for all members of the community-stable, predictable, and continuous life
Disadvantages of traditional economy
-discourages new ideas and new ways of doing things-stagnation and lack of progress-lower standard of living
advantages of command economy
Can change direction drastically in short period of time. Little uncertainty about WHAT, HOW, and FOR WHOM to produce
Disadvantage of command economy
loss of freedomlittle to no incentive to work can't deal with major issues
market economy
Economic decisions are made by individuals or the open market.
Capitalism
an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
Advantage of market economy
people have freedom in decisions, variety in g&s, everyone has a say in the economy
Disadvantage of market economy
- doesn't provide all the goods and services needed by society - doesn't adequately provide for the needs of all people - likely to experience periods of expansion and contraction of business activity - can not account for many harmful costs of doing business
mixed economies
Economic systems in which some allocation of resources is made by the market and some by the government
Great Depression
the economic crisis beginning with the stock market crash in 1929 and continuing through the 1930s
Communism
a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.
Advantages of a mixed economy
1. Provides assistance for some people who might otherwise be left out2. Democracy: voters can use electoral power to affect WHAT, HOW, and FOR WHOM decisions3. Socialism: FOR WHOM question addressed more directly
disadvantages of mixed economies
high taxes or forced to produce less of something
GDP per capita
GDP divided by population
Privatization
To change from government or public ownership or control to private ownership or control.
Vouchers
certificates that could be used to purchase government-owned property during privatization
Five Year Plan
Stalin's economic policy to rebuild the Soviet economy after WWI. tried to improve heavy industry and improve farm output, but resulted in famine
Gosplan
central planning authority in the former Soviet Union that devised and directed Five-Year Plans
Collectivization
Creation of large, state-run farms rather than individual holdings; allowed more efficient control over peasants; part of Stalin's economic and political planning; often adopted in other Communist regimes.
Perestroika
A policy initiated by Mikhail Gorbachev that involved restructuring of the social and economic status quo in communist Russia towards a market based economy and society
Great Leap Forward
Started by Mao Zedong, combined collective farms into People's Communes, failed because there was no incentive to work harder, ended after 2 years.
Nationalism
conversion of private property to government ownership
European Union (EU)
an economic association established in 1957 by a number of Western European countries to promote free trade among its members