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Intro. To Econ.
Key terms and phrases
Economics Vocabulary Homework
1.) Copy down each of the assigned vocabulary words and
definitions. Then leave 5-7 line spaces underneath the word
and definition during class lecture today.
2.) Provide a well thought out, thorough, reasonable, and
logical real life example of the vocabulary term. You can use
yourself as the subject in the example. If an example of the
term is impossible, then write a sentence using the term in
a meaningful way. (Show me you understand the meaning
of the word.) 3pts each
3.) Draw or provide an image of each vocabulary term 3pts
each
4.) This assignment is worth 150 points…the actual
vocabulary test is worth 125 points. So, do your
homework!!!
1.) Need:
 A physiological or biological requirement for maintaining life (survival) , such
as the need for air, water, food, shelter, and sleep
 Your Example:
 Your image:
2.) want:
 A psychological/physical desire which makes life more enjoyable, but which
is not essential to sustain life (survival).
 Your Example:
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3.) economics:
 the study of how people seek to satisfy their needs and wants
by making choices
 Your Example:
 Your image:
4.) goods
 physical, tangible products/objects used to satisfy people's wants and
needs.
 Your Example:
 Your image:
Goods
 Good – tangible economic product
that is useful, relatively scarce,
transferable to others; used to
satisfy wants and needs.
 Consumer good – good intended for final use by
consumers rather than business
 Capital good – manufactured good used to produce
other goods and services
 Durable good – good that lasts more than three years
when used regularly (>3 years)
 Nondurable good – item that lasts for less than three
years when used regularly; can be a capital or a
consumer good (<3 years)
Consumer or Capital?
Non-Durable or Durable?
5.) services:
 An activity or action that provides direct satisfaction of wants
and needs without the production of a tangible product or
good. (that you can’t drop on your foot, ranging from
hairdressing to websites)
 Your Example:
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Services
work or labor performed for someone; economic product that
includes haircuts, home repairs, forms of entertainment
6.) scarcity:
 A condition of human existence that exists because society has
unlimited wants and needs, but limited resources used for their
satisfaction. In other words - THE ECONOMIC PROBLEM

while we all want a bunch of stuff, we can't have everything that we want. In
slightly different words, this scarcity problem means: (1) that there's never enough
resources to produce everything that everyone would like produced; (2) that some
people will have to do without some of the stuff that they want or need; (3) that
doing one thing, producing one good, performing one activity, forces society to give
up something else; and (4) that the same resources can not be used to produce two
different goods at the same time.
 We live in a big, bad world of scarcity. This big, bad world of scarcity is what the
study of economics is all about.
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7.) allocation:
 The process of distributing resources for the
production of goods and services, and for
consumption by households. This process of allocation is
essential to an economy's effort to address the problem of scarcity. An allocation is
efficient if the resources, goods, and services are distributed according to the
economy's highest valued uses.
 Your Example:
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8.) shortage (not to be confused with scarcity)
 The situation resulting when the quantity demanded
exceeds the quantity supplied of a good or service,
 They occur when producers will not or cannot offer goods or services at the current
prices.
 Can be temporary of long-term.
 During a holiday season, I might find the shelves empty of “Air Jordans” on Wednesday,
but return on Friday to find that the same shelf filled with plenty of “Air Jordans” to meet
the demand of all the customers looking to buy “Air Jordans” that day.
 Not having enough of one brand of soda in the store on a Saturday because of a sale on
soda is another example of shortage.
 usually because the price is for some reason below the equilibrium price (The market
clearing price at which the quantity demanded by buyers equals the quantity supplied by
sellers) in the market.
 Your Example:
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9.) Factors of Production or Resources:
 All natural, human, and manufactured inputs that
are used to produce goods and services; the
ingredients of economic activity: land, labor, capital
and entrepreneurship (enterprise): (The creative juices of
CAPITALISM; the ANIMAL SPIRITS of the ENTREPRENEUR).
 Your Example:
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10.) land
 All natural resources or gifts of nature that are used to produce goods and services. One
of four categories of resources, or factors of production

The other three are labor, capital, and entrepreneurship.
 This category includes the natural resources used to produce goods and services,
including the land itself; the minerals and nutrients in the ground; the water, wildlife,
and vegetation on the surface; and the air above.
 Pending colonization of the moon, it is in fairly fixed SUPPLY. Marginal increases are
possible by reclaiming land from the sea and cutting down forests (which may impose
large economic costs by damaging the environment), but the expansion of deserts may
slightly reduce the amount of usable land.
 Owners earn MONEY from land by charging RENT.
 Your Example:
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11.) labor:
 All forms of human work that are used for production for which a person is paid.
One of the four categories of resources, or factors of production
 The other three are capital, land, and entrepreneurship.

While labor is commonly thought of as those who work in factories, it includes all
human efforts (except entrepreneurship),
 such as those provided by clerical workers, technicians, professionals, managers,
and even company presidents.
 Your Example:
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Capital
 Any money, physical and man-made resources (All buildings, equipment and
human skills ) that is used to produce other goods and services. One of the four
categories of resources, or factors of production
 Common examples of capital are the factories, buildings, trucks,
tools, machinery, and equipment used by businesses in their
productive pursuits.
 Capital's primary role in the economy is to improve the productivity
of labor as it transforms the natural resources of land into wantsand-needs-satisfying goods.
12.) physical capital
 Human-made objects used to create other goods and services; capital goods
 Manufactured items used to produce goods and services.
 Includes buildings and tools.
 A shoe factory building and all of the sewing machines and other specialized
machinery for making shoes make up part of the shoe company’s physical
capital.
 Your Example:
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13.) Financial capital
 money used by entrepreneurs and businesses to buy what they need to
make their products or provide their services
 These are also termed paper assets.
 Your Example:
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14.) Human capital
 The knowledge and skills a worker gains through education and
experience.

The health, strength, education, training, and skills which people bring to
their jobs
 The sum total of a person's productive knowledge, experience, and
training.
 The acquisition of human capital is what makes a person more productive.
Human capital continued…
 In other words, Human capital is the stuff that enables people to earn a
living. Human capital can be increased by investing in education, training and
health care.
 Economists increasingly argue that the accumulation of human as well as
physical CAPITAL (plant and machinery) is a crucial ingredient of economic
GROWTH, particularly in the NEW ECONOMY.
 Your Example:
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15.) entrepreneurship
 A special sort of human effort that
takes on the risk of bringing labor,
capital, and land together and
organizing production.
 Must be willing to take a RISK in
pursuit of a PROFIT.
 The human resource that assumes the risk of
organizing other productive resources to produce
goods and services.
 One of the four basic categories of resources, or
factors of production (the other three are labor,
capital, and land).
 Your Example:
 Your image:
Entrepreneur
A risk-taker in search of profits; Starts new
businesses or bring new products to market
16.) Incentives:
 rewards or punishments that influence people’s actions;
a thing that
motivates or
encourages
one to do
something
or not do
something
#1.) example of a positive incentive:
#1.) positive incentive image:
#2.) example of a negative incentive:
#2.) negative incentive image:
17.) Trade-offs (guns or butter)
 All the alternatives that we give up whenever we choose one course of action over
another. Guns and butter refers to a famous model explaining the relationship between
2 goods that are important for a nation's economic growth.
 It models the relationship between a nation's investment in defense and civilian goods.
In this model, a nation has to choose between two options when spending its finite
resources. It can buy guns, butter, or a combination of both. This relationship
represents a country's choices between defense and civilian spending in more complex
economies.
 In short, a country that decides to produce more military goods (“guns”) has fewer
resources to devote to consumer goods (“butter”) and vice versa. (Remember,
resources are limited!)
 The steel used to make a tank is no longer available for building the dairy equipment
need to make butter.
 Your Example:
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
18.) opportunity cost
The highest valued alternative foregone (given up) in the pursuit of an activity
and when a choice is made.
 This is a hallmark of anything dealing with economics--and life for that matter-because any action that you take prevents you from doing something else.
 The ultimate source of opportunity cost is the pervasive problem of scarcity
(unlimited wants and needs, but limited resources). Whenever limited resources
are used to satisfy one want or need, there are an unlimited number of other
wants and needs that remain unsatisfied.
 Herein lies the essence of opportunity cost. Doing one thing prevents doing
another.
 The true cost of something is what you give up to get it. This includes not only the
money spent in buying (or doing) the something, but also the economic benefits
(UTILITY: Economist-speak for a good thing; a measure of satisfaction) that you did
without because you bought (or did) that particular something and thus can no
longer buy (or do) something else.
O.P. continued…
 For example, the opportunity cost of choosing to train as a lawyer is not merely the
tuition fees, PRICE of books, and so on, but also the fact that you are no longer able
to spend your time holding down a salaried job or developing your skills as a
footballer.
 These lost opportunities may represent a significant loss of utility (Economist-speak
for a good thing; a measure of satisfaction).
 Going for a walk may appear to cost nothing, until you consider the opportunity
forgone to use that time earning money.
 Everything you do has an opportunity cost .
 ECONOMICS is primarily about the efficient use of scarce resources, and the notion
of opportunity cost plays a crucial part in ensuring that resources are indeed being
used efficiently.
 Your Example:
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19.) Thinking at the margin:
 When economists look at decision, they point out one more
characteristic in addition to opportunity cost. Many
decisions involve adding one unit or subtracting one unit,
such as one minute or one dollar.
 From an economist’s point of view, when you decide how
much more or less to do, you are thinking on the margin.
 It means to think about your next step forward. The word
"marginal" means "additional." The first glass of lemonade
on a hot day quenches your thirst, but the next glass, maybe
not so much. If you think at the margin, you are thinking
about what the next or additional action means for you.
 How many additional tomatoes can you get by taking better care of your garden?

If an hour extra work weeding means you will get 12 more tomatoes,

then one additional hour of work results
 in 12 additional tomatoes.
 Economists sometimes summarize that by saying your marginal product of
labor is 12. That just means you can get 12 more tomatoes for one additional hour
of work.
 On the flip side of that, you could equally well say
that the marginal cost of a producing
one additional tomato is 5 additional minutes
(1/12th of an hour) of your labor.
 Every new tomato
 costs you
 another five minutes of weeding.
 As another example, if one additional Facebook
friend costs you an additional 10 minutes of your
attention…
 Then what is the marginal cost?
 the marginal cost is 10 minutes of your time per
new Facebook friend.
 Your Example:
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20.) efficiency
 Requires that resources go towards their most socially optimal
use: those who value something most end-up getting that
which they value. (using resources in a such a way as to
maximize the production or output of goods and services)
 Your Example:
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21.) equity
 Fairness
 Your Example:
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