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Economic Decisions and Systems
Chapter 1 Vocabulary & Concepts
38
Business
11th Grade
08/23/2011

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Term
needs
Definition

things that you must have to live

Ex: water, food, shelter

Term
wants
Definition

things that make your life better but isn't exactly needed to survive

Ex: newest style of clothes, big house, new car

Term
difference between needs and wants
Definition
wants are things that make your life more enjoyable and easier but not necessary; needs are necessary to live
Term
goods
Definition
things that can be seen and touched (tangible items)
Term
services
Definition

actions that are bought by a consumer

(intangible items)

Term
economic resources
Definition
the way goods and services are made
Term
What are the 3 kinds of economic resources?
Definition
natural resources, human resources, and capital resources
Term
What are natural resources?
Definition

materials that come from nature

Ex: oil, minerals, nutrients

Term
What are human resources?
Definition

these are the people that help with the production of the goods and services

Ex: entrepreneurs, farmers, sales people

Term
Entrepreneur
Definition
type of human resource; uses resources to develop an entirely new product or service
Term
What are capital resources?
Definition

the money and tools that are used in the production of goods and services

Ex: buildings, equipment, money to buy a truck or pay employees

Term
The Basic Economic Problem
Definition
we have unlimited needs and wants but limited economic resources
Term
Scarcity
Definition
not having enough resources for every need; forces us to make choices among the alternatives
Term
Economic decision-making
Definition
the process of choosing which wants, among many options, will satisfy you the most
Term
tradeoff
Definition

when you give up something for something else

Ex: don't buy new shoes, but instead go to movies with friends and get food

Term
opportunity cost
Definition
the value of the choice you decided not to go with
Term
Decision-Making Process
Definition
1. define the problem 2. identify choices 3. evaluate pros and cons of each choice 4. choose one choice 5. act upon your choice 6. review your decision
Term
factors of production
Definition
economic resources
Term
The Three Economic Questions
Definition

1 - What will be produced?

2 - How will it be produced?

3 - What will be satisfied with what is produced?

Term
What to Produce?
Definition
Nations do not have all the same types of natural resources; therefore, they must use what they do have to produce goods
Term
How to Produce?
Definition

the Nations must decide what resources they will use in order to produce the goods

Ex: instead of manual farming, there is new farming equipment that makes it easier and more efficient

Term
What Needs and Wants to Satisfy?
Definition
a nation must decide which needs and wants are the most important when deciding what goods and services to produce
Term
Economic System
Definition
the plan for answering the three economic questions
Term
Command Economy
Definition
resources are owned and controlled by the government; what you do with your money can be controlled by the government
Term
Market Economy
Definition
resources are owned by the people of the country; government has a limited role
Term
Traditional Economy
Definition
goods and services are produced the way it has always been; used in lesser-developed countries and not-yet participating in the global economy
Term
Mixed Economy
Definition
combines elements of command and market economies; government makes many of the decisions about how the resources will be used, but once people gain money, then they have the resources to purchase more goods and services
Term
Capitalism
Definition
private ownership of resources by individuals rather than the government, owners are free to decide what to produce and consumers are free to decide what to buy
Term
U.S. Economic System Principles
Definition
private property, freedom of choice, profit, and competition
Term
Private Property
Definition
the right of private property means you can own, use, or dispose of things of value; own what you want and decide what you want to do with it
Term
Freedom of Choice
Definition
you make the decisions by yourself and you must face the consequences of those decisions
Term
Profit
Definition
the money left after all the costs of operating a business have been paid; businesses/individuals that invest and take risks have a right to make a profit
Term
Competition
Definition
rivalry among businesses to sell their goods and services, forces businesses to improve products-keep costs low-provide effective customer service-search for new ideas
Term
consumer
Definition
person who buys and uses goods and services
Term
producers
Definition
individuals and organizations that decide what products and services will be available for consumers to buy; the people making the goods and services
Term
demand
Definition
how much of the goods and services the consumers are willing and able to buy
Term
supply
Definition
the goods and services that businesses are willing and able to provide
Term
market price
Definition
point where supply and demand are equal
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