Econ Ch. 1 - Vocabulary 1. 2. 3. 4. 5. 6. 7. 8....

Vocabulary
1. Need- something that is essential for survival
2. Want- something we desire that is not necessary for survival
3. Goods- Physical objects that someone produces
4. Services- Actions or activities that one person performs for another
5. Scarcity- limited amounts of goods or services with unlimited demand
6. Economics- the study of of people seek to satisfy their needs and wants
7. Shortage- When consumers want more of a good that the produces is willing to make
8. Entrepreneur- people who decide how to combine resources to create new goods or
services
9. Factors of production- the resources used to make all goods and services
10. Land- refers to all natural resources used to produce goods and services.
11. Labor- the effort people devote to tasks for which they are paid
12. Capitol- any human made resources that is used to produce other goods and services
13. Physical Capital- the human-made objects used to create goods and services
14. Human Capital- the knowledge and skills a worker gains through education and
experience
15. Trade-off- the act of giving up one benefit in order to gain another greater benefit
16. “Guns or Butter”- a phrase expressing the idea that a country that decides to produce
more military good has fewer resources to produce consumer goods and vice versa
17. Opportunity Cost- the most desirable alternative given up as the result of a decision
18. Thinking at the Margin- the process of deciding whether to do or use one additional unit
of some resource
19. Cost/Benefit analysis- a decision-making process in which you compare what you will
sacrifice and gain by a specific action
20. Marginal Cost- the extra cost of adding one unit
21. Marginal Benefit- the extra benefit of adding one unit
22. Production Possibilities Curve- a graph that shows alternative ways to use an economy's
productive resources
23. Production possibilities frontier- a line on a production possibilities curve that shows the
maximum output an economy can produce
24. Efficiency- the use of resources in such a way as to maximise the output of goods and
services
25. Underutilization- the use of fewer resources than an economy is capable of using
26. Law of increasing costs- an economic principle which states that as production shifts
from making one good or service to another, more and more resources are needed to
increase production of the second good or service.