| A | B |
|---|
| scarcity | resources are limited, human wants are unlimited |
| economics | the study of scarcity |
| consumer | buyer, one who uses a good or service |
| producer | seller, one who produces a good or service |
| factors of production | land, labor, capital, entrepreneurship |
| land | all natural resources used in production |
| labor | human effort used in production |
| capital | tools and machinery used in production |
| entrepreneurship | business owner, risk taker, assembles other factors of procution |
| goods | physical things that can be produced and purchased |
| services | work that one does for another for payment |
| incentive | benefits offered people to act in certain ways |
| utility | usefulness or satisfaction received from the use of a good or service |
| economize | make decisions based on what YOU believe is the best combination of costs and benefits |
| rational self interest | principle that all choices people make are the based on economizing |
| opportunity cost | the value of the next best choice when you make a decision |
| production possiblities curve | graph that shows all combinations of goods that can be produced with limited resources |
| marginal cost | additional cost of using another unit of a good or service, or engaging in an activity |
| marginal benefit | additional benefit of consuming another unit of a good or service, or engaging in an activity |
| efficiency | the maximum number of goods and services are being produced with resources available |
| underutilization | producing less than what is possible with limited resources |
| law of increasing opportunity costs | as production of one good increases, greater amounts of another good must be given up |
| macroeconomics | study of economy as a whole |
| microeconomics | study of individual players in an economy |
| positive economics | statements that tell it like it is |
| normative economics | statements that impose value judgements or state what "should be" |
| economic systems | the way a society uses resources to satisfy people's wants |
| private property rights | things owned by people or businesses are theirs to use how they choose |
| laissez-faire | hands off approach to government involvement in an economy |
| Milton Friedman | promoter of free markets |
| consumer sovereignty | the consumer holds the ultimate power in an economy |
| competition | in market economies, producers must oppose other producers for the consumer's purchase |
| profit | money earned by producers after factors of production are paid for |
| voluntary exchange | trade that occurs when both people believe they are benefitting |
| market | a place where households and businesses come together |
| factor market | market in which land, labor, and capital is bought and sold |
| product market | market in which goods and services are bought and sold |
| circular flow diagram | shows movement of goods and services, money, and factors of production through an economy |
| mixed economy | economy in which elements of command, market, and traditional are present |
| traditional economy | economy in which tradition answers the 3 questions |
| market economy | economy in which producers and consumers answer the 3 questions |
| command economy | economy in which the government answers the 3 questions |
| nationalization | moving from a market to command economy |
| privatization | moving from a command to market economy |
| public goods | goods provided to all through government funds |
| free riders | those who receive utility but don't pay for it |
| negative externality | a third party is hurt by the production or consumption of a good or service |
| positive externality | a third party benefits from the consumption or production of a good or service |
| subsidy | money received from a government |
| tax | payment to a government |
| transfer payments | movement of money from one group of people to another without the production of a good or service |
| Adam Smith | Founder of economics, coined term "invisible hand" |
| TANSTAAFL | "There ain't no such thing as a free lunch" |
