Terms

What is capital?

Definitions
Any human-made resource that is used to create other goods or services.

What are factors of production?

Land, labour, and capital; the three groups of resources that are used to make all goods and services.

3. What is the purpose of the production possibilities graph? 4. What makes an economy efficient? What is opportunity cost?

Shows alternative ways to use an economy's productive resources.

Using resources in such a way as to maximize the production or output of goods and services Opportunity cost is the alternative we give up when we choose one option over the other.

6. Why is a production possibilities graph curved?

The axes of the graph can show categories of goods and services, such as farm goods and factory goods or capital goods and consumer goods.

What is a physical capital?

All human-made goods that are used to produce other goods and services; tools and buildings

What is human capital?

The skills and knowledge gained by a worker through education and experience.

9. Why is efficiency so important?

Lesser goods and services will be produced in an inefficient economy.

10. Why is technology important to the economy? What is an entrepreneur?

A countries production possibilities depend on both its technological level and the resources it has available. Ambitious leader who combines land, labor, and capital to create and marked new goods or services

12. What is the purpose of a decision-making grid?

Using a decision making grid can help you determine whether you are willing to accept the opportunity cost of a choice you are about to make.

13. What is land, according to an economist? 14. What is a centrally planned economy? What are the characteristics? 15. What are the key economic

To refer to all natural resources used to produce goods and services.

Economic system in which the central government makes all decisions on the production and consumption of goods and services.

What goods and services should be produced? How should these

questions?

goods and services be produced? Who consumes these goods and services?

16. What are the advantages of the free market? 17. What are the characteristics of a traditional economy?

Individuals and privately owned business own the factors of production, make what they want, and buy what they want. A traditional economy relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it. The traditional economic system revolves around the family.

What is a product market?

The market in which households purchase the goods and services that firms produce.

19. What is the purpose of competition? 20. What is the function of the economic system? 21. What is the role of government in a free enterprise system? 22. What determines whether something is a public good? 23. What is gross domestic product? What is externality?

The struggle among producers for the dollars of consumers. Competition is the regulating force behind the free market. The method used by a society to produce the method used by a society to produce and distribute goods and services. We expect the government to carry out its constitutional responsibilities to protect property rights, contracts, and other business activities in our free enterprise system. Shared good or service for which it would be inefficient or impractical "1" To make consumers pay individually "2" to exclude nonpayers The total value of all final goods and services produced in a particular economy. An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.

25. Why is legal equality important to the free enterprise system? What is a business cycle?

Everyone gets the same equal rights.

A period of macroeconomic expansion followed by a period of contraction.

What is scarcity? What is underutilization? What are services? What are goods?

Limited quantities of resources to meet unlimited wants. Using fewer resources than an economy is capable of using. Actions or activities one person performs of another Physical objects such as clothes or shoes.

What is labor What is a self-interest group? What are factor payments?

The effort that people devote to a task for which they are paid. Own personal gain. The income people receive for supplying factors of production: land, labor, and capital.

What is a product market?

Market in which households purchase the goods and services that firms produce.

What does it mean to privatize?

To sell to individuals state-run firms, which are then allowed to compete with one another in the marketplace

What is a collective? What is laissez-faire?

Large farm leased from the state to groups of peasant farmers. The doctrine that states the government generally should not intervene in the marketplace.

What is standard of living? What is welfare? What is market failure?

Level of economic prosperity. Government aid to the poor A situation in which the market does not distribute resources efficiently.

What is microeconomics?

The study of the economic behavior and decision making of small units, such as individuals, families and businesses.

What is the poverty threshold?

An income level below which income is insufficient to support families and households

What is an interest group?

A private organization that tries to persuade public officials to act or vote according to group members interests.

Circular flow diagram

Physical and monetary flow rotate between firms and households