Economic Decision Making
Resources used to produce goods and services. Land, Labor, and Capital
Factors of Production
An economic system in which decisions about production and consumption are based on custom and tradition.
Traditional economy.
The development of skills or knowledge in one aspect of a job or field of interest.
Specialization
The quantity of a good or service that consumers are both willing and able to buy at various prices.
Demand
the point at which the quantity of a product demanded by consumers in a market equals the quantity supplied by producers.
Market equilibrium
The tools, machines, and buildings used to produce goods and services
Capital
An economic system in which decisions about production and consumption are made by a powerful ruler or government.
Command economy.
The allocation of separate tasks to different people.
Division of Labor.
The quantity of a good or service that producers are willing and able to offer for sale at various prices.
Supply
The price at which the quantity of a product demanded by consumers equals the quantity supplied by producers.
Equilibrium price.
value of the next best alternative that is given up when making a choice. This is the measure of what you must give up to get what you most want.
Opportunity cost
An economic system in which economic decisions are left up to individual producers and consumers.
Market economy.
the condition that exists when someone can produce a good or service using fewer resources than someone else.
Absolute Advantage.
Economic law stating that as the price of a good or services increases, the quantity demanded decreases, and vice versa.
Law of demand.
Government-imposed limits on the prices that producers may charge in a market
Price controls
A measure of the efficiency with which goods and services are produced. Often stated as the quantity produced per person per hour
productivity
An economic system in which both the government and individuals play important roles in production and consumption. Most modern economies are considered this.
Mixed Economy.
The characteristic of a society in which people rely on others for most of the goods and services they want. This results in specialization and trade.
Economic Interdependence.
Economic law stating that as a price of a good or service increases, the quantity supplied increases and vice versa.
Law of supply.
A minimum price set by the government to prevent prices from going too low. Minimum wage laws set a price floor for wages paid to workers.
Price floor
A simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available.
Production Possibility frontier.
The fairness with which an economy distributes its resources and wealth.
Economic equity
The condition that exists when someone can produce a good or service at a lower opportunity cost than someone else.
Comparative advantage.
A product that is used or consumer jointly with another product. Such good usually has more value when paired with its co-part.
Complementary good.
A maximum price set by the government to prevent prices from going too high.
Price Ceiling