Ch. 1

• What is scarcity in economics?

  A situation of unlimited wants with limited resources
• What are economic goods?

  Goods that are scarce
• What are free goods?

  Goods not normally regarded as scarce
• How is poverty defined in economics?

  A lack of basic necessities or low income
• What is a firm in economic terms?

  An organization that produces goods or services
• What is a positive statement?

  A statement about what is, based on facts
• What distinguishes a normative statement?

  It involves a value judgement about what ought to be
• What is a value judgement?

  A statement based on opinion or beliefs
• What are factors of production?

  Resources used in the production process
• What is opportunity cost?

  The value of the next-best alternative forgone
• What does a production possibility curve (PPC) represent?

  The maximum combinations of goods produced
• What is a trade-off in economics?

  A choice requiring the sacrifice of another alternative
• What are capital goods?

  Goods used in the production process
• What are consumer goods?

  Goods produced for present use
• What is long-run economic growth?

  Expansion in the productive capacity of the economy