a
define production
measure of amount of output produced in a specific time period with a given amount of resources
define market economy
economic system in which supply, demand, and the price system help people allocate resources and make the what, how, and for whom to produce decisions
define scarcity
fundamental economic problem facing all societies resulting from a combination of scarce resources and people's virtually unlimited needs and wants
define standard of living
quality of life based on ownership of necessities and luxuries that make life easier
define subsidy
government payment to encourage or protect a certain economic activity
define distribution
the way in which income is allocated among families, individuals, or other groups
define supply and demand
Law of Demand: As price increases, consumers demand less; as price decreases, they buy more.
Law of Supply: As price increases, producers supply more; as price decreases, they supply less.
define factors of production
productive resources needed to produce goods; land, capital, labor, entrepreneurship
define circular flow chart
a fundamental economic diagram visualizing how money, goods, and services move between households and businesses within an economy
define diminishing returns
stage of production where output increases at a decreasing rate as more units of variable input are added
define consumption
the final purchase and use of goods and services by individuals or households to satisfy current needs and wants
define traditional economy
economic system in which the allocation of scarce resources is the result of ritual, habit, or custom
define opportunity cost
cost of the next next alternative use of money, time, or resources, when one choice is made rather than another
define entrepreneur
risk-taking individuals who introduce new products into the economy
define fixed costs
costs of production that do not change when output changes
define capitalism
economic system in which private citizens own and use the factors of production in order to generate profits
define mixed economy
economic system that has some combination of traditional, command, and market economies
define production possibilities curve
diagram representing all possible combinations of goods and/or services an economy can produce when all productive resources are fully employed
define inflation
sustained rise in the general level of prices of goods and services
define variable costs
prodcution cost that varies as output changes
define socialism
economic system in which government owns some factors of production and has a role in determining what and how goods are produced
define planned/command economy
economic system characterized by a central authority that makes most of the major economic decisions
define cost benefit analysis
comparison of the cost of an action to its benefits
define substitutes/complements
Substitutes are alternative products that satisfy similar needs or wants, allowing consumers to switch based on price or preference.
Complements are products that add value to one another, typically used together so that a change in demand for one affects the other.
define equilibrium price
price when quantity supplied equals quantity demanded