(Con)AP Micro 1.1 Scarcity

Scarcity

The idea that resources are limited and choices must be made about their allocation.

Absolute Scarcity

Physical limitations of resources, such as land, water, and oil.

Relative Scarcity

The value placed on resources, making them scarce despite not being absolutely limited.

Free Resource

A resource that can be utilized infinitely by everyone in a population, such as air.

Scarce Resource

A resource that requires significant time and effort to obtain, leading to higher prices, like caviar.

Opportunity Cost

The value of what is given up when choosing one option over another.

Supply and Demand

The economic principle that when resources are scarce, prices increase, encouraging efficient use or substitution.

Capitalism

An economic system where prices and market forces allocate resources.

Planned Economy

An economic system where the government determines how to allocate resources.

Adam Smith

A pro-capitalist thinker who argued that self-interest can benefit society more than direct attempts to improve it.

Factors of Production

The four categories needed to create a product:land, labor, capital, and entrepreneurship.

Capital

Produced goods used to create other goods, such as tools and machinery.

Capital Goods

Goods used to produce other goods.

Consumption Goods

Goods used for personal enjoyment and not for production.

Scarce Good

A limited resource with potentially unlimited demand, creating scarcity.

Rival Good

A good that, when used by one person, limits its availability for others.

Economic Models

Simplified representations based on imperfect assumptions to analyze economic behavior.

Normative Statements

Opinions or ethical claims that cannot be tested, such as beliefs about fairness.

Positive Statements

Testable claims about economic behavior, even if results are inconclusive.

Incentives

Tools like prices, taxes, and subsidies used to influence decisions regarding resource use.