ECON 2100 Test 1

Scarcity

In economics, scarcity refers to the condition of having to choose among alternatives because resources are limited relative to human wants.

Opportunity cost

Opportunity cost refers to the value of the next best alternative that is forgone when making a choice.

Law of Increasing Opportunity Cost

As more resources are allocated to produce one good, the opportunity cost of producing additional units of that good increases.

Fundamental Economic Questions

1. What to produce?

2. How to produce?

3. For whom to produce?

Factors of production

1. Labor

2. Capital

3. Natural resources

Outputs

Goods and services

Technology

Process of transferring inputs into outputs

Index

a number derived from a series of observations and used as an indicator or measure

what overseas output = f(input)

Institutions

normative statements

statements that cannot be proven false

positive statements

statements that can be proven false

Models are _

simple and useful

specialization

economy producing the goods and services of which it has a comparative advantage