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Economics Chapter 1 Test

Terms

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Economics
the study of scarcity and choice
Scarcity
limited quantities of resources to meet unlimited wants
Choice
the act of selecting or making a decision when faced with two or more possibilities
Goods
tangible products that we use to satisfy our wants and needs
Services
intangible activities that are performed by other people for money; productive acts that satisfy economic wants
Consumption
the act of buying final goods and services
Consumer
one who buys goods and services for personal use
Factors of Production
a resource (such as labor, land, or capital) that is used to produce a good or service
Human resources
the people whose efforts and skills go into the production of goods and services
Labor productivity
output per worker per time period
Technology
a culture's methods and tools for making things
Standard of living
the quantity and quality of goods and services available to an individual or society
Renewable Resources
one capable of being replaced or renewed
Capital/Capital Goods/Capital Resources
goods used to produce other goods
Entrepreneurship
the process of bringing together the factors of production
Entrepreneurs
a person who gathers together the factors of production to create and operate a business enterprise in the hope of earning profits
Allocate
to assign parts of a whole
Marginalism
the evaluation of the usefulness of adding one more of an item to the production of a good or service
Opportunity Cost
the amount of goods or services that must be done without in order to obtain another good or service
Command Economy
one in which decisions to allocate resources are made by the government
Traditional Economic System
one in which resources are allocated according to tradition and custom, and people make a living in the same way as they have done for a long time
Market Economy
one in which the allocation of resources is determined by the free operation of the forces of supply and demand and market prices
Microeconomics
the study of the effects of economic forces on individual parts of the economy
Macroeconomics
the study of the forces affecting the economy as a whole
Ceteris Paribus
the assumption that all things other than what is being considered will stay the same
Economic Model
a simplified representation (verbal, graphic, or mathematical) of an economic problem
Mediums of exchange
something readily accepted in payment for goods or services
Standard of value
a way to measure the worth of what is bought and sold
Store of value
any form of commodity, asset, or money that has value and can be stored and retrieved over time
Currency
the part of the money supply consisting of paper money and coins
Legal Tender
a currency that by law must be accepted in payment of debt
Fiat money
all forms of U.S. currency that have value because the government says it does
Token money
coins whose metallic value is less than their face value
Checks
a written order directing a depository institution to pay a sum of money
Trade-Off
the giving up of one thing to obtain something else
Capital Formation
the production of capital goods
Production Possibilities Curve
a graph showing the various combinations of goods and services that an economy might produce if all its resources were fully and effectively employed
Luxury
a nonessential good or service that adds comfort and pleasure to life
the four factors of production
human resources, natural resources, capital resources, and entrepreneurship
How does human resources influence the production of goods and services?
the SIZE of the workforce and LABOR PRODUCTIVITY affect the amount of goods and services produced
Productivity is affected by
skill of the labor force, quality and quantity of machinery and tools available per worker, and technology
What can be strengthened to improve living standards?
labor, capital, and management
Shortages of natural resources prompt the governments to enact laws that would either:
limit the consumption of nonrenewable resources or require the restocking of renewable resources
deprecation
the decline in value of capital goods
barter
swapping something of value for whatever it was that they wanted
"fractional currency"
coins; called this because the government produces them primarily for the convenience of making change for a dollar
Economic System
the way a society answers the what, how, and who questions

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