economics — The study of how people choose to use their limited resources to satisfy their unlimited wants.

economy — A system used to manage limited resources for the production. distribution. and consumption of goods and services.

positive economics — The branch of economics that uses objective analysis to find out how the world works. The goal is to describe how things are.

normative economics — The branch of economics that applies value judgments to data in order to recommend actions or policies. The goal is to advise how things ought to be done.

scarcity — The condition that results be cause people have limited resources but unlimited wants.

tradeoff — The exchange of one benefit or advantage for another that is thought to be better.

cost-benefit analysis — A way to compare the costs of an action with the benefits of that action. If benefits exceed costs. then the action is worth taking.

incentive — Any factor that encourages or motivates a person to do something. Prices, taxes, and laws create incentives that influence how people behave.