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Flashcards in Chapter 1 Deck (24):
1

scarcity

lack of resources available to meet all human wants

2

wants

desires that can be met by consuming products; unlimited and ever changing

3

needs

things necessary for survival

4

goods

physical objects that can be bought

5

services

work one person does for another pay

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consumer

person who buys a good or service for personal use

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producer

person who makes a good or provides a service

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what will be produced?

societies must decide on a mix of goods to produce, depends on their natural resources; some countries allow producers and consumers to decide, in other countries the government decides

9

how will it be produced?

decisions on production methods involve using resources efficiently; unskilled labor force: might use labor intensive methods, skilled labor force: might use capital intensive methods

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for whom will it be produced?

how they are distributed involves two questions: how should each person's share be determined? how will goods and serviced be delivered to people?

11

factors of production

land, labor, capital, entrepreneurship

12

incentives

benefits that encourage people to act in certain ways

13

utility

benefit or satisfaction gained from using a good or service

14

opportunity cost

the value of the next best alternative a person gives up, not the value of all possible alternatives

15

cost-benefit analysis

examining cost, expected benefits of choices

16

marginal cost

additional cost of using one more unit of good or service

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marginal benefit

additional benefit of using one more unit of good and service

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efficiency

producing the maximum amount of goods and services possible

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underutilization

producing fewer goods and services than possible

20

microeconomics

studies behavior of individual players in an economy (individuals, families businesses)

21

macroeconomics

studies behavior of economy as a whole (inflation, unemployment, aggregate demand and aggregate supply)

22

positive economics

describes and explains economic behavior as it is

23

normative economics

studies what economic behavior should be

24

Adam Smith

founder of modern economics, wrote "An Inquiry into the Nature and Causes of the Wealth of Nations"