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.