Chapter 1
What is a need? What is a want?
A need is something necessary for survival.
A want is something people would like to have, but do not need to survive.
Actions people do or provide for others.
Services
Buyers and sellers are focused on personal gain.
Self-interest
A period of change, moving toward a market system.
Aid where the government collects tax money and redistributes it to those in need.
Welfare
When a good or service is unavailable.
Shortage
Limited amount of resources.
Scarcity
These two terms are associated with centrally controlled economies.
Socialism and communism
A combination of the three economic systems.
Mixed economies
The study of economic behavior of individuals, families, and businesses.
Microeconomics
When the economy uses resources to maximize production of goods and services.
Efficiency
The most desirable alternative given up
Opportunity Cost
An economy with little government involvement and economic freedom.
Free enterprise
The government makes most economic decisions.
Centrally planned economy
Situations where the free market does not efficiently provide resources to solve a problem.
Market failures
Term used to describe the trade-off of more military goods than consumer goods.
Guns or butter
Graphs that show alternative ways of using a country’s resources.
Production possibilities curves
When firms purchase land, labor, and capital (factors of production) from households.
Factor market
When households purchase goods and services produced by firms.
Product market
The total value of all final goods and services produced in a year.
Gross domestic product (GDP)
Deciding about adding or subtracting one unit of a resource
Thinking at the margin
The line on the curve that shows the maximum possible production.
Production possibilities frontier
A range with no clear divisions of economic systems.
Continuum
Economic decisions are made by individuals and are based on exchange or trade.
Market economy
An economic side effect of a good or service.
Externality