| A | B |
|---|
| scarcity | inability to satisfy all wants at the same time |
| choice | selecting an item or action from a set of possible alternatives |
| opportunity cost | is what is given up when a choice is made |
| production | combining of human, natural, capital, and entrepreneurship resources to make goods or provide services |
| consumption | using goods and services |
| entrepreneur | person who takes a risk to produce goods and services in search of profit |
| Utility | An abstract measure of the satisfaction consumers derive from consuming goods and services |
| Costs | An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something. |
| Benefit | Monetary or non-monetary gain received because of an action taken or a decision made |
| Trade-off | The giving up of one benefit or advantage in order to gain another regarded as more favorable |
| Decision Making | Reaching a conclusion after considering alternatives and their results |
| Firms | Economic units that demand productive resources from households and supply goods and services to households and government agencies |
| Consume | To buy and use a good or service |
| human resources | workers and managers |
| capital resources | the tools, machines, and buildings used to produce goods and services |
| natural resources | air, water, trees |
| Productive Resources | natural, human, capital & entrepreneurship |
| Wants | Desires that can be satisfied by consuming or using a good or service. Economists do not differentiate between wants and needs |
| needs | mandatory in order to be healthy, comfortable, successful, etc |
| economy | A system used to manage limited resources for the production, distribution, and consumption of goods and services |
| economic enigma | a puzzle or riddle that may be explained through economic analysis |
| scarcity-forces-tradeoffs principle | the idea that limited resources force people to make choices and face tradeoffs when they choose |
| no-free-lunch principle | the idea that every choice involves tradeoffs; a restatement of the scarcity-forces-tradeoffs principle |
| costs-versus-benefits principle | the idea that people choose something when the benefits of doing so outweigh the costs |
| cost-benefit analysis | a way to compare the costs of an action with the benefits of that action; if benefits exceed costs, then the action is worth taking |
| thinking-at-the-margin principle | the idea that many decisions involve choices about using or doing a little more or a little less of something rather than making a wholesale change |
| marginal cost | what is given up by adding one more unit to an activity |
| marginal benefit | what is gained by adding one more unit to an activity |
| incentives-matter principle | the idea that people respond to incentives in generally predictable ways |
| trade-makes-people-better-off principle | the idea that people benefit by focusing on what they do well and then trading with others, rather than trying to do everything for themselves |
| market | an arrangement that brings buyers and sellers together to do business with each other |
| markets-coordinate-trade principle | the idea that markets are usually the best way to coordinate exchanges between buyers and sellers |
| future-consequences-count principle | the idea that decisions made today have effects in the future |
| law of unintended consequences | the general observation that the actions of people and governments always have effects that are not expected or intended |
| data | factual information, often in numerical form |
| variable | a quantity that can vary, or change |
| curve | a line representing data points on a graph |
| economic model | a simplified representation of reality that allows economists to focus on the effects of one change at a time |
| rational-behavior model | the idea that people behave in ways that are based on reason and self-interest |
| good | a physical article that has been produced for sale or use |
| service | work done by someone else for which a consumer, business, or government is willing to pay |
| shortage | a lack of something that is desired |
| input | a resource used in the production process; also known as a factor of production |
| output | the goods or services generated by the production process |
| perpetual resource | a natural resource that is widely available and in no danger of being used up; examples include sunlight and wind |
| renewable resource | a natural resource that, with careful planning, can be replaced as it is used; examples include forests and fresh water |
| nonrenewable resource | a natural resource that cannot be replaced once it is used; examples include oil and coal |
| financial capital | money used for investment or production |
| physical capital | the manmade objects—tools, machinery, buildings, and other goods—used in production; also called capital goods |
| capital goods | the manmade objects—tools, machinery, buildings, or other fabricated goods—used in production; also called physical capital |
| productivity | a measure of the efficiency with which goods and services are produced, stated as a ratio of output per unit of input |
| marginal utility | the extra satisfaction or pleasure achieved from an increase of one additional unit of a good or service |
| law of diminishing marginal utility | the general observation that as the quantity of a good or service consumed increases, the benefits for the consumer of each additional unit decrease |
| negative utility | a lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility |
| production possibilities frontier | a simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available |
| production possibilities curve | a graph showing the combinations of two goods that can be produced with a given set of resources |
| economic efficiency | the result of using resources in a way that produces the maximum amount of goods and services |
