Basic Economics Vocabulary
Needs - Things you need to survive - food, shelter, clothing
Wants - Things that you desire but could live without
Scarcity - Condition of limited resources combined with unlimited wants
Factors of Production - Resources (Human, Natural, Capital) and Entrepreneurship
Economics - The study of efforts to satisfy unlimited wants with scarce resources
Production - the process of creating goods and services
Opportunity Cost - The cost of the next best alternative choice that is NOT chosen - it is the
value of what you give up
Goods - A tangible commodity - something you can touch
Services - Work that is performed by someone for a fee
Division of Labor - Workers each perform distinct, separate tasks more frequently
Productivity - The measure of the amount of output produced over time (how efficient are you
with your resources?)
Specialization - Productive inputs do whatever task they are able to do best
Consumers - Buyers
Sellers - Persons that sell goods and services. Their goal is to make profit.
Market economy - Individuals, not the government, own the factors of production; lots of
economic freedom and choice
the invisible hand - the free market runs by itself when there is competition, no government
intervention, and people follow their own self-interests
laissez-faire - no government intervention in the market
natural resources - Materials or substances such as minerals, forests, water, animals, and soil
used to make stuff
human resources - People who work to produce goods and services
capital resources - The tools, equipment, and buildings that are used to produce goods and
services
Entrepreneur - A person who organizes, manages, and takes on the risks of starting a business.
