Economics: study of how individuals & nations make choices about ways to use scarce resources to fulfill their needs & wants.2. Scarcity: state in which people don’t & cannot have enough income, time, or other resources to satisfy.3. Factors of production: resources of land, labor, capital, & entrepreneurship used to produce goods & services.4. Entrepreneurship: ability to start new businesses, to introduce new products, & techniques.Section 21. Trade-off: exchanging one thing for the use of another, often making unavoidable choices because of the problem of scarcity.2. Opportunity cost: value of the next best alternative given up for the alternative that was chosen.Section 31. Economy: all activity in a nation that affects the production, distribution, & use of goods & services.2. Economic model: simplified representation of the real world which shows people’s reactions to changes in the economy; theory.3. Values: beliefs or characteristics that an individual or group considers important.Chapter 2Section 11. Traditional economic system: economic systems are based on customs, beliefs, & ways of doing things that have been passed down from generation to generation.2. Command economic system: the government controls the factors of production & makes all decisions about their use; also called controlled economy.3. Market economic system: individuals own the factors of production & make economic decisions through free interaction – government doesn’t intervene.4. Distribution of income: money payment for work, the amount of health care, education, food, & so on, that each person receives; distribution of goods & services among all members of an economic system.Section 21. Capitalism: private individuals own the factors of production and decide how to use them within the limits of the law; market economic system & free enterprise system.2. Free enterprise system: individuals own the factors of product...
