| A | B |
|---|
| Economics | The study of the decisions for making & distributing goods and services AND the choices that people make to satisfy their wants and needs. |
| Scarcity | Condition of not being able to have all the goods and services one wants due to limited resources. It is the basic economic problem. |
| Needs | Items required for survival and living (food, water, shelter) |
| Wants | Items that add pleasure to life (iPhone, designer clothes, laptop). Wants are UNLIMITED but resources are LIMITED (money, time, available goods). |
| Trade Off | Making an economic choice to give up all or part of another alternative. You can't have everything you want. |
| Opportunity Cost | The value of the best alternative given up; the cost of what you give up to have something else. |
| Incentive | The reason we make a choice and what motivates us to take action. |
| Positive Incentive | Reward that encourages a behavior (profits, coupons, wages, good grades, chore allowances). |
| Negative Incentive | Penalty that discourages behavior (fines, parking ticket, tardy table, being grounded). |
| Marginal Benefit | Change in the total benefit resulting from an action. Additional benefits of a decision. |
| Marginal Cost | Change in the total costs resulting from an action. Additional costs of a decision. |
| “PACED” Decision Making | State problem, list alternatives, evaluate, and make decision. |
| Market Economy | Freedom of choice, prices determined by supply and demand, producers motivated by profit, consumers vote with their dollars. |
| Supply | How much producers are willing and able to produce at a certain price. Upward curve when graphing. |
| Demand | How much consumers are willing and able to buy at a certain price. Downward curve when graphing. |
| Law of Demand | People will buy more of a good or service at lower prices and less at higher prices. When demand increases, prices will increase (shortages may result for high-demand items). |
| Law of Supply | Producers will increase the quantity supplied at higher prices and decrease the quantity supplied at lower prices. When supply increases, prices will decrease to get rid of surplus. |
| Natural Disasters | Unexpected events such as tornados and hurricanes can increase demand for a product no matter what the price. Ex: Bottled water, ice, generators. |
