Foundations of Economics: Scarcity, Choice, and PPC

Scarcity

Insufficient resources to satisfy all needs and wants.

Choice

Decisions on what, how, and for whom to produce.

Opportunity Cost

Value of the next best alternative foregone.

Factors of Production

Inputs used to produce goods and services.

Land

Natural resources available for production.

Labour

Physical and mental effort in production.

Capital

Machinery and tools used in production.

Human Capital

Skills and knowledge enhancing productivity.

Natural Capital

Resources necessary for survival and production.

Financial Capital

Economic resources measured in monetary value.

Enterprise

Combining factors of production to earn profit.

Production Possibility Curve (PPC)

Visual representation of production combinations possible.

Overallocation

Excessive resources diverted to certain goods.

Underallocation

Insufficient resources diverted to certain goods.

Consumers

Buy goods to maximize total satisfaction.

Producers

Create goods to maximize profits.

Governments

Redistribute income and provide public goods.

Production Decisions

Determining types and quantities of goods produced.

Resource Allocation

Distribution of resources among competing uses.

Economic Profit

Revenue exceeding total costs in production.

Technology

State of knowledge affecting production capabilities.

Maximizing Utility

Achieving highest satisfaction from resource use.

Competing Alternatives

Options available when making economic choices.

Socially Desirable

Production that benefits society as a whole.

Socially Undesirable

Production that harms societal welfare.