| A | B |
|---|
| need | something like air, food, or shelter that is necessary for survival |
| want | an item that we desire, but that is not necessary for survival |
| economics | the study of how people seek to satisfy their needs and wants by making choices |
| goods | physical objects such as clothes or shoes |
| services | actions or activities that one person performs for another |
| scarcity | limited quantities 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 |
| 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 | all human-made goods that are used to produce other goods and services ex: 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 military 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 resource |
| productive possibilities curve | a graph that shows alternative ways to use an economy's resources |
| production possibilities frontier | the line on the 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, cost is 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 making another, the cost of producing the second item increases |
