Need
Something people must have to survive, like air, food, and shelter.
Want
Something that people would like to have but is not necessary for survival.
Scarcity
Limited quantities of resources to meet unlimited wants.
Goods
Objects like cars and clothes
Services
Actions that one person performs for another
Shortage
When a good or service is unavailable
Factors of Production
Land, Labor, Capital
Land
A natural resource like coal, water, or forests.
Labor
Work that people will pay for.
Capital
Man-made resources to produce other goods or services, like a tractor.
Human Capital
The knowledge and skills a worker gains through education and experience.
Entrepreneur
A person who takes on a risk by combining all three Factors of Production.
Economics
The study of how people seek to satisfy their needs and wants by making choices.
Trade-off
Giving up one benefit in order to gain another, greater benefit.
Opprotunity Cost
The most desirable alternative given up as the result of a decision.
Cost-Benefit Analysis (CBA)
A decision-making process in which you compare what you will sacrifice and gain by a specific action.
Marginal Cost
Extra cost of producing one unit.
Marginal Benefit
The extra benefit of adding one unit.
Production Possibilities Curve
A graph that shows alternative ways to use an economy's productive resources.
Production Possibilities Frontier
The line on the Production Possibilities Graph. Every point on this line is a trade-off.
Underutilization
Using fewer resources than an economy is capable of using
Shift to the Right
Economic Growth: More materials available.
Shift to the Left
Economic Decline: Less materials available.
Law of Increasing Costs
As factors of production shift from making one good to another, the cost of producing the second good increases.
Efficiency
Using resources in such a way as to maximize the production of goods and services