a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade

the study of the choices of consumer, business managers, and government officials to attain their goals given their scarce resources

situation in which unlimited wants exceed the limited resources available to fulfill those wants; we must make choices because of this.

the idea that, because of scarcity, producing more of one good or service means producing less of another good or service

highest valued alternative that must be given up to engage in an activity

when the government decides how economic resources will be allocated (ex: North Korea, Soviet Union)

decisions of households and firms interacting in markets allocate economic resources

when economic decisions result from both interaction of buyers and sellers in the market and government plays a role in the allocation of the resources

the ability of an economy to produce increasing quantities of goods and services

occurs when a good or service is produced at the lowest possible cost

occurs when production is in accordance with consumer preferences

occurs in markets when both buyer and seller of a product are made better off by the transaction

goods and services bought domestically but produced in other countries

the fair distribution of economic benefits

simplified version of reality used to analyze real-world economic situations

analysis concerned with "what is"

analysis concerned with "what should be"

study of how households and firms make choices, how they interact in markets and how the government attempts to influence their choices

study of economy as a whole including topics such as inflation, unemployment, and economic growth

organization that produces a good or service

someone who operates a business; decides "what" and "how"

practical application of an inventions; significant improvement in a good or in the means of producing a good

processes it uses to produce goods and services

tangible merchandise (ex: books/computers)

activities done for others (ex: haircuts)

total amount a firm receives for selling a good or service

the difference between a firm's revenue and its costs

all persons occupying a house

used by firms to produce goods and services

financial: stocks and bonds
physical: computers, machine tools

accumulated training and skills that workers posses

something measurable that can have different values (ex: income)