Economics: Section 1-2

sec. 1-2 quiz vocab: o.c, factors of production, technology, efficiency, production possibilties, etc.

scarcity

the condition of having limited resources and unlimited wants and needs

allocate

the process of distributing a scarce resource

firms

economic term for businesses

economics

a social science that studies how individuals, governments, firms, and nations satisfy their unlimited wants

opportunity cost

the value or benefit of the BEST option that you forgo when making a choice

microeconomics

the study of how individual firms allocate scarce resources

macroeconomics

the study of a nations’ economy

normative economics

economic analysis that is subjective or opinion based

positive economics

economic analysis that is factual

incentives

something that encourages you to take or not take a course of action

producers and consumers

two types of actors in the economy:

products

a good or service that customers buy to satisfy a need or a want

goods

a physical product or item sold to a customer to fulfill their needs or wants

service

an action taken on or provided to a customer to fulfill a need or want

factors of production

the basic building blocks used to produce any goods or services

Natural Resources

resources found on or in the Earth; considered scarce

land

another name for natural resources

coal, oil, wheat

3 examples of land

human resources

any human effort exerted during production; intellectual or physical

labor

another name for human resrouces

legal advice, plumber, truck driver

3 examples of labor

capital resources

manufacturing goods used to produce other products (both goods AND services)

capital

another name for capital resources

ovens, axes, cars

3 examples of capital:

means of production

capital resources is often referred to as the:

investment

the purchase of capital goods

entrepreneurship

combination of organizational abilities and risk taking involved in starting a new business

efficiency

producing the maximum amount of products with the available factors of production

technology

a capital resource or idea that increases efficiency

model

an abstract representation of a part of the economy; usually a graph

production possibilities curve

example of a model:

assumptions

a way economists simplify or reduce the complexity of a situation to make it easier to understand

PPC assumption one

a country/firm/person can only produce two products

PPC assumption two

a country/company has a fixed amount of resources and uses them all efficiently

marginal

analysis of one additional unit

marginal opportunity cost

the opportunity cost of one additional unit

the bowed out shape of the PPC graph

example of increasing marginal opportunity cost

recession

economic decline with high unemployment and inefficiently using land, labor, and capital

insufficient point

any point inside of the PPC model; shows that producers are using their production factors inefficiently

infeasible point

a point on a graph that cannot be produced (maximum efficiency was already reached)

economic growth

when an economy increases its’ productive capacity or is able to produce more goods and services

increase of land, labor, capital, or technological advancement

4 causes of economic growth:

shift

the act of a curve expanding during a period of economic growth