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Economics 1


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natural resources that are used to make goods and services
a situation in which a good or service is unavailable
the study of how people seek to satisfy their needs and wants by making choices
command economy
economic system in which the central government makes all the decisions
traditional economy
economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
production possibilities curve
a graph that shows alternative ways to use an economy's resources
any human made resource that is used to create other goods and services
actions or activities that one person performs for another
the struggle among producers for the dollars of consumers
something like air, food, or shelter that is necessary for survival
using resources in such a way as to maximize the production of goods and services
guns or butter
a phras that refers to the trade-off that nations face when choosing whether to produce more or less military or consumers goods
the effort that people devote to a task for which they are paid
ambitious leader who combines land, labor, and capital to create and market new goods and services
thinking at the margin
deciding whether to do or use one additional unit of some resource
opportunity cost
the most desirable alternative given up as the result of a decision
an arrangement that allows buyers and sellers to exchange things
a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout society
an alternative that we sacrifice when we make a decision
the financial gain made in a transaction
laissez faire
the doctrine that states that government generally should not intervene in the marketplace
one's own personal gain
a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
product market
the market in which households purchase the goods and services that firms produce
physical objects such as clothes or shoes
market economy
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange markets
production possibilities frontier
the line on the production possibilities graph that shows the maximum possible output
mixed economy
market-based economic system with limited government involvement
using fewer resources than an economy is capable of using
invisible hand
term economists use to describe the self-regulating nature of the marketplace
human capital
the skills and knowledge gained by a worker through education and experience
law of increasing costs
law states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
factors of production
land, labor, and capital; the three groups of resources that are used to make all goods and services
profit motive
the force that encourages people and organizations to improve their material well-being
an item that we desire but that is not essential to survival
physical capital
all human-made goods that are used to produce other goods and services; tools and buildings
limited quantities of resources to meet unlimited wants

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