1. scarcity:
    the condition that results because people havelimitied resources byt unlimited wants.
  2. factors of productions
    the resources used to produce goods and service; defined as land,labor and capital.
  3. perpetual resources
    a natural resours that is widely avaiable and in no danger of being used up; examples include sunlight and wind.
  4. non-renewable resources:
    a nautral resource that cannot be replaced once it is used; expample includes oil and coal.
  5. renewable resources:
    a naturaly resource that, with careful planning, can be replaced as it is used; examples include forest and fresh water.
  6. human capital:
    the knowledge and skills people gain from education, on the job training, and other experiences.
  7. entrepreneurship:
    the willingsness and ability to take the risks involved in starting and managing a buisness.
  8. productivity:
    a measure of the efficiency with which goods and services are produced, stated as a ration of output per unit of input. determined by diciding total output by one of the three inputs involved in its production:land labor or capital.

  9. tradeoffs:
    the exchange of one benefit or advantage for another that is though to be better.
  10. opportunity cost:
    the value of the next best alternative that is given up when making a choice; a measure of what you must give up to get what you want.
  11. 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 technolody currently available.
  12. utility:
    the pleasure, satishfaction, or benefit a person recieves from consuming a product or service or from taking an action.
  13. law of diminishing 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.
  14. 3 economic goals:
    what goods and services are to be produced

    how are goods and services to be produced

    for whom are goods and services to be produced.
  15. 6 economic goals:
    • economic freedom: the stability to make our own economic decisions without interference from the government
    • economic equity:involves the fair and just distribution of a societys wealth
    • economic growth: improving standard living
    • economic stability:the goods and services we count on
    • economic security:seeks to provide its less fortunate members with the support the need in terms of food shelter and health care to live decently.
    • economic efficiency: making the most of the economies resources.
  16. economic efficiency:
    the result of using resources in a way that produces the maximum amount of goods and services.
  17. invisible hand and lassez-faire
    ih:adam smiths metaphor to explain how an individuals pursuit of economic self interest can promote the well being of society as a whole.

    Lf: the principle that government should not interfere with the workings of the economy; a french term meaning"let them do"
  18. circular flow model in a mixed economy
    • a.income earned when an individual sells or rents a factor of production that he or she owns; for example wages are a factor payment made to workers in exchange for their labor. (wages,rents, interest, dividends)
    • b.government payment to a household or firm for which the payer recieves no good or service in return; examples social security checks and unemployment benefits
  19. command economy
    an economic system in which decisions about production and consumption are made by a powerful ruler or government
  20. traditional economy
    an economic system in which decisions about production and consumtion are based on custom and tradition.
  21. market economy
    an economic system in which economic decisions are left up to individual producers and consumers.
  22. mixed economy
    an economic system in which both the government and individuals play important roles in production and consumption; most modern economies are mixed economies
  23. free enterprise systerm
    an economic systerm in which the means of production are mostly privately owned and operated for a profit
  24. specialization
    the development of skills or knowledge in one aspect of a job or field of interest.
  25. divisions of labor
    the allocations of serparte tasks to different people, based on the principle of specialization
  26. volutary exchange
    the act of willingly trading one iteam or service for another
  27. commerce clause
    article 1 section 8 of the U.S. constitution which gives congress the power to regulate interstate trade.
  28. comparative advantage
    the condition that exists when someone can produce a good service at a lower opportunity cost then someone else.
  29. absolute advantage
    the condition that exists when someone can produce a good or service using fewer resources than someone else.
  30. economic interdependence
    the characteristic of a society in which people rely on others for most of the goods and services they want.
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