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. A luxury.
Economics
the study of how people seek to satisfy their needs and wants by making choices, the branch of social science that deals with the production and distribution and consumption of goods and services and their management
goods
physical objects such as clothes or shoes. These can be purchased by consumers.
services
actions or activities that one person performs for another.
scarcity
limited quantities of resources to meet unlimited wants.
shortage
a situation in which producers will not or cannot offer goods or services at the current prices.
factors of production
resources that are used to make all goods and services.
land
all natural resources that are used to produce goods and services.
labor
the effort that people devote to a task for which they are paid.
capital
any human-made resource that is used to create other goods and services.
physical capital
the human-made objects used to create other goods and services.
human capital
the knowledge and skills a worker gains through education and experience.
entrepreneur
ambitious leader who decide how to combine land, labor, and capital to create and market new goods and services.
trade-off
all alternatives that must be given up when we choose one course of action over another
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
opportunity cost
the most desirable alternative given up as the result of a decision
thinking at the margin
when you decide how much more or less to do
production possibility graph
A graph that shows alternative ways to use an economy's resources
production possibilities frontier
the line on a production possibilities graph that shows the maximum possible output
efficiency
using resources in such a way as to maximize the production of goods and services
underutilization
using fewer resources than an economy is capable of using
cost
to an economist, the alternative that is given up because of a decision
law of increasing costs
As we shift factors of production from making one good or service to another, the cost of producing the second item increases