| A | B |
|---|
| 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 |
| economics | The study of how people seek to satisfy their needs and wants by making choices |
| goods | physical objects such as clothing or shoes |
| services | actions or activities that one person performs for another |
| scarcity | limited quanities of resources to meet unlimited wants |
| shortage | a situation in which a good or service is unavailable |
| factors of production | land, labor and capital; the three groups of resources that are used to make all goods and services |
| Land | natural resources that are used to make goods and services |
| capital | any human made resource that is used to create other goods and services. |
| 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 |
| entrepreneur | ambitious leader who combines land, labor, and capital to create and market new goods and services |
| trade-off | an alternative that we sacrifice when we make a decision |
| guns or butter | a phrase that refers to the trade offs that nations face when choosing whether to produce more or less miltary or consumer goods |
| opportunity cost | the most desirable alternative given up as the result of a decision |
| thinking at the margin | deciding whether to do or use one additional unit of some recource |
| producing | transforming resources into goods and services |
| exchange | trading goods, services and money for other goods and services |
| saving | postponing consumption example:piggy bank |
| consuming | satisfying individual or collective wants |
| investing | improving productive resources |
| 3 productive resources | land, labor, capital |
| production possibilities curve | a graph that show alternative ways to usa an economies productive resources |
| production possiblilties frontier | the line on a production possibilities graph that shows the maximum possible output |
| effciency | 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 beacause of a decision |
| law of increasing costs | 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 |
