Econ Ideas - Unit 1

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Question Answer
ScarcityThe condition that exists because human wants exceed the capacity of available resources to satisfy those wants;
TradeoffThe giving up of one benefit or advantage in order to gain another regarded as more favorable.
Opportunity CostThe second-best alternative (or the value of that alternative) that must be given up when scarce resources are used for one purpose instead of another.
EconomicsThe study of how people, firms and societies choose to allocate scarce resources with alternative uses.
EconomizingConsidering the costs and benefits of various alternatives and choosing the one with the greatest net benefits.
Production Possibilities CurveA table or graph that shows the full employment capacity of an economy in the form of possible combinations of two goods, or two bundles of goods, that could be produced with a given amount of productive resources and level of technology.
Circular Flow ModelThe movement of output and income from one sector of the economy to another; often illustrated as a circular flow diagram.
Human CapitalThe health, education, experience, training, skills and values of people.
LaborThe quantity and quality of human effort available to produce goods and services.
Physical CapitalAn asset used in production that is made by humans, but is non-human.
Land "Gifts of nature" that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests and actual fields of land.
Command EconomyAn economy in which most economic issues of production and distribution are resolved through central planning and control.
Traditional EconomyAn economy in which customs and habits from the past are used to resolve most economic issues of production and distribution.
Market EconomyAn economy that relies on a system of interdependent market prices to allocate goods, services, and productive resources and to coordinate the diverse plans of consumers and producers, all of them pursuing their own self-interest.