Thinking Like an Economist Bundle 1 Key Terms Capitalism • Private citizens own and use factors of production to make money. Command Economy • Central authority (government) makes most big economic decisions. Cost-Benefit Analysis • Comparing the cost of something to the benefit you get from it. Division of Labor • Dividing work into separate tasks to be performed by different workers. Economic Growth • An increase in a country’s output of goods and services. Economics • The study of how people use scarce resources to satisfy unlimited wants and needs. Factors of Production • Resources needed to produce goods; Land, capital, labor, and entrepreneurship. Free-Enterprise System • Privately owned businesses work to make a profit with limited government intervention. Goods • Physical product that is useful, transferable, and satisfies wants and needs. Market Economy • An economic system where supply, demand, and price help people make economic decisions. Needs • Basic requirements for survival, such as food, clothing, and shelter. Opportunity Cost • Cost of the next best alternative use of money, time, or resources. Productivity • The amount of output in a specific time period using a given amount of resources. Scarcity • Economic problem of meeting unlimited wants and needs with limited resources. Services • Work performed for someone else. Socialism • Economy where government owns some factors of production and chooses what is produced and how. Specialization • Someone performs a specific task and gets better at doing it. Usually as part of a larger group. Trade-Offs • What is given up when one choice is made instead of another. Traditional Economy • Economy where scarce resources or other economic activity is the result of ritual, habit, or custom. Utility • How useful something is. Value • How much something is worth.