Economics - Unit 1 Fundamentals Flashcards

Fundamental Economic Concepts; Economic Systems

431703562	economics	the study of how individuals and nations make choices about ways to use scarce resources to fulfill their needs and wants
431703563	scarcity	a situation in which unlimited wants exceed the limited resources available to fulfill those wants
431703564	trade-offs	giving up one thing in favor of another
431703565	opportunity costs	the highest-valued alternative that must be forgone when a choice is made
431703566	rational decisions	choice in which you weigh the costs and benefits of each option
431703567	marginal benefit	the additional satisfaction or benefit received when one more unit is produced
431703568	marginal cost	the cost of producing one more unit of a good.
431703569	marginal benefit-marginal cost analysis	Rational decision making involves marginal benefits that equal or exceed the marginal costs
431703570	resources	anything that is used to produce goods or services
431703571	allocation of resources	decision on how to divide scarce resources among different uses
431703572	goods	tangible products that we use to satisfy our wants and needs
431703573	services	actions or activities that one person performs for another
431703574	factors of production	land, labor, capital, entrepreneurship
431703575	capital goods	Buildings, machines, technology, and tools needed to produce goods and services.
431703576	human capital	the skills and knowledge gained by a worker through education and experience
431703577	producers	individuals and organizations that determine what products and services will be available for sale.
431703578	consumers	people who buy goods and services
431703579	entrepreneur	(n.) a person who starts up and takes on the risk of a business
431703580	barter	To exchange goods or services without the use of money
431703581	production possibilities curve	A curve that shows the possible combinations of two products that an economy can produce, given that its productive resources are fully employed and efficiently used.
431703582	specialization	occurs when individual workers focus on single tasks (division of labor), enabling each one to be more efficient and productive
431703583	division of labor	the process of dividing work into specialized jobs that are performed by separate individuals
431703584	assembly line	Production method that breaks down a complex job into a series of smaller tasks
431703585	imports	goods and services purchased from other countries
431703586	exports	Goods and services sold to other countries.
431703587	voluntary exchange	the act of buyers and sellers freely and willingly engaging in non-fraudulent market transactions. Both parties should benefit from the exchange.
431703588	non-fraudulent exchange	without fraud/without deceiving; honest, voluntary exchange
431703589	economic systems	The ways in which a society answers the three basic economic questions to organize production, distribution, and consumption of goods and services to solve the economic problem of scarcity
431703590	3 basic economic questions	Every economic system must answer the three basic economic questions: What to produce; How to produce it? For whom to produce?
431703591	command economy	a system in which the central government makes all economic decisions
431703592	traditional economy	An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
431703593	market economy	a system based on private ownership, free trade between buyers and sellers, and competition
431703594	mixed economy	market-based economic system with limited government involvement.
431703595	invisible hand	a term coined by Adam Smith to describe the self-regulating nature of the marketplace
431703596	laissez faire	the doctrine that states that government generally should have little or no involvement in the marketplace
431703597	comparative advantage	the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.
431703598	absolute advantage	the ability to produce more of a given product using a given amount of resources
431703599	free enterprise	The freedom of private businesses to operate competitively for profit with minimal government regulation.
431703600	capitalism	economic system in which the means of production are privately owned and operated for profit
431703601	incentives	rewards that are offered to try to persuade people to take certain economic actions. Ex. profit and the ownership of private property are incentives to start a business
431703602	consumer sovereignty	the role of consumer as the ruler of the market, determining what products will be produced
431703603	profit motive	To be motivated by the desire to make money.
431703604	private ownership	property/resources that individuals own and control; a core principle of capitalism
431703605	role of government	To maintain legal and social framework, overcome market failure by providing public goods and services, maintain competition, redistribute income, correct for externalities, to protect individuals and their property rights, stabilize the economy
431703606	government regulation	a rule that a government establishes and enforces to protect the public or provide equal access to specific goods, and services.
431703607	deregulation	the removal of some government controls over a market
431703608	privatization	To change from government or public ownership or control to private ownership or control.
431703609	income redistribution	government activity that takes income from some people through taxation and uses it to help citizens in need
431703610	public goods and services	Goods and services that cannot be withheld from those who don't pay for them, and benefits that may be "consumed" by one person without reducing the amount of the product available for others. Examples include national defense, streetlights, and roads and highways. Public services include welfare programs, law enforcement, and monitoring and regulating trade and the economy.
431703611	private goods	Goods that are both excludable and rival in consumption, Goods that, when consumed by one individual, cannot be consumed by another
431703612	externalities	costs that are not calculated into the price; spillovers
431703623	standard of living	a measure of quality of life based on the amounts and kinds of goods and services a person can buy
431703624	inputs	labor, machinery, buildings, and other resources used to produce output
431703625	outputs	goods and services that firms produce
431703626	productivity	the quantity of goods and services produced from each unit of labor input
431703627	economic goals	economic growth, full employment, economic efficiency, price level stability, economic fredom, an equitable distribution of income, economic security, balance of trade
431703628	redistribution of income	The transfer of income through government taxation, spending and assistance programs targeted at particular income groups. The goal is to transfer money from higher-income groups to lower-income groups.
431703629	capital investments	firms purchase of new machines and buildings. firms invest in capital goods to increase their capacity to produce more goods and services in order to maximize profits
431703630	market failures	when free market doesn't provide needed good/services or when free market hurts people
431703631	property rights	The rights of an individual or business to own, use, rent, invest in, buy, and sell property.