another economy

Basic Economic Problem

Scarcity occurs when wants exceed available resources.

Scarcity

A situation in which resources are limited compared to the wants of people.

Opportunity Cost

What you give up when you choose one option over another.

Example of Opportunity Cost (Individual)

Buying sneakers means you can't buy a concert ticket.

Example of Opportunity Cost (Government)

Building a highway means less money can be allocated to hospitals.

Non-economic factors influencing choice

Decisions made based on interest, fun, peer influence, or long-term benefit.

Factors of Production

Elements needed to produce goods: land, labor, capital, and entrepreneurs.

Land (Factors of Production)

Natural resources that require human capital to be useful.

Labor (Factors of Production)

The workforce; training and education enhance skills.

Capital (Factors of Production)

Tools and machines used in production.

Entrepreneur (Factors of Production)

The individual who combines land, labor, and capital in production.

Geographical mobility

Movement of workers for job opportunities, like moving from village to city.

PPC (Production Possibility Curve)

Graph that shows maximum output combinations of two goods with given resources.

Efficient use on the PPC

Points on the curve represent efficient use of resources.

Inefficient use on the PPC

Points inside the curve indicate waste or inefficiency.

Impossible production on the PPC

Points outside the curve cannot be achieved with current resources.

Shape of PPC

Bowed out shape indicating increasing opportunity costs.