economics
the study of how organizations use limited resources to satisfy unlimited wants and needs
scarcity
limited quantities of resources to meet unlimited wants
factors of production
land, labor, capital, entrepreneurship (the resources that are used to make all goods and services)
land
natural resources such as land, water, and trees
goods
tangible items that people can buy; physical objects such as clothes or shoes
services
actions or activities one person performs for another
entrepreneurship
the ability of individuals to start new businesses or invent new processes
trade-off
exchanging one thing for another; what you gain from a decision
opportunity cost
The next best alternative given up as the result of a decision
production possibilities curve
an economic model to show the maximum combinations of goods and services that can be produced from a fixed amount of resources
need
something like air, food, or shelter that is necessary for survival
want
an item that we desire but that is not essential to survival
shortage
a situation in which a good or service is temporarily unavailable
labor
the effort that people devote to a task for which they are paid
physical capital
all human made goods that are used to produce other goods and services; tools and buildings
human capital
the skills and knowledge gained by a worker through education and experience
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
thinking at the margin
deciding whether to do or use one additional unit of some resource
production possibilities frontier
the line on a production possibilities graph that shows the maximum possible output and trade-off of goods and services
efficiency
using resources in such a way as to maximize the production of goods and services
underutilization
using or producing fewer resources than an economy is capable of using or producing
law of increasing cost or diminishing returns
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