need
something essential of survival
want
something we desire but that is not necessary for survival
economics
study of how people seek to satisfy their needs and wants by making choices
goods
physical objects that someone produces
services
actions or activities that one person performs for another
scarcity
limited amounts of goods and services are available to meet unlimited wants
shortage
occurs when consumers want more of a good than producers are willing to make available at a particular price
Factors of production
resources used to make all goods and services
land
all natural resources used to provide goods and services
labor
effort people devote to tasks for which they are paid
capital
any human made resource that is used to produce other goods and services
physical capital
human made objects used to create other goods and services
Human capital
knowledge and skills a worker gains through education and experience
Entrepreneur
people who decide how to combine resources to create goods and services
trade off
the act of giving up one benefit in order to gain another, greater benefit
guns or butter
the choice of spending money on military or domestic needs
opportunity cost
the most desirable alternative somebody gives up as the result of a decision
Thinking at the margin
when you decide how much more or less to do
productions possibility curve
a graph that shows alternate ways to use a economies productive resources
efficiency
the use of resources in such a way to maximize the outputs of goods and services
underutilization
the use of fewer resources that the economy is capable of using
cost/benefit analysis
what to sacrifice and what to gain
production possibilities frontier
the line that makes up the graph
law of increasing costs
increasingly expensive tradeoffs
marginal cost
extra cost of adding one unit
marginal benefit
the extra benefit of adding the same unit