Scarcity
Limited quantities of resources to meet unlimited wants
Economics
The study of how people seek to satisfy their needs and wants by making choices
Factors of production
Land, labor, and capital; the three groups of resources that are used to make all goods and services
Capital
Any human-made resource that is used to create other goods and services
Human capital
The skills and knowledge gained by a worker through education and experience
Centrally planned economy
The government alone makes the decisions. Command economy
Traditional economy
Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
Mixed economy
Economy made up of elements from more than one economic system
Opportunity cost
The most desirable alternative given up as the result of a decision
Production possibility graph
A graph that shows alternative ways to use an economy's resources
Guns versus butter
The economic theory about how the military spending effects how much a government can spend on civilian spending.
Safety nets
Aid programs such as unemployment insurance, welfare payments, medical insurance, old-age benefits, and food subsidies
Market economy
Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
Entrpreneur
a person who starts up and takes on the risk of a business
Shortage
a situation in which a good or service is unavailable for a period of time
Goods
tangible products that we use to satisfy our wants and needs
Services
actions or activities that one person performs for another
Land
Natural resources used to make goods and services
Labor
Productive work (especially physical work done for wages)
Production possibility frontier
Represents the point at which an economy is most efficiently producing its goods and services and, therefore, allocating its resources in the best way possible
Efficiency
Using resources in such a way as to maximize the production of goods and services
Underutilization
Using fewer resources than the economy is capable of using
Economic system
The method used by a society to produce and distribute goods and services
3 Economic questions
What to produce? How to produce? For whom to produce?