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scarcity:
the condition that results because people havelimitied resources byt unlimited wants.
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factors of productions
the resources used to produce goods and service; defined as land,labor and capital.
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perpetual resources
a natural resours that is widely avaiable and in no danger of being used up; examples include sunlight and wind.
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non-renewable resources:
a nautral resource that cannot be replaced once it is used; expample includes oil and coal.
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renewable resources:
a naturaly resource that, with careful planning, can be replaced as it is used; examples include forest and fresh water.
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human capital:
the knowledge and skills people gain from education, on the job training, and other experiences.
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entrepreneurship:
the willingsness and ability to take the risks involved in starting and managing a buisness.
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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.
productivity=output/input
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tradeoffs:
the exchange of one benefit or advantage for another that is though to be better.
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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.
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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.
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utility:
the pleasure, satishfaction, or benefit a person recieves from consuming a product or service or from taking an action.
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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.
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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.
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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.
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economic efficiency:
the result of using resources in a way that produces the maximum amount of goods and services.
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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"
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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
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command economy
an economic system in which decisions about production and consumption are made by a powerful ruler or government
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traditional economy
an economic system in which decisions about production and consumtion are based on custom and tradition.
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market economy
an economic system in which economic decisions are left up to individual producers and consumers.
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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
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free enterprise systerm
an economic systerm in which the means of production are mostly privately owned and operated for a profit
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specialization
the development of skills or knowledge in one aspect of a job or field of interest.
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divisions of labor
the allocations of serparte tasks to different people, based on the principle of specialization
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volutary exchange
the act of willingly trading one iteam or service for another
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commerce clause
article 1 section 8 of the U.S. constitution which gives congress the power to regulate interstate trade.
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comparative advantage
the condition that exists when someone can produce a good service at a lower opportunity cost then someone else.
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absolute advantage
the condition that exists when someone can produce a good or service using fewer resources than someone else.
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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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