Scarcity, Factors of Production, & Opportunity Cost

This set of vocabulary flashcards covers the fundamental economic concepts of scarcity, the four factors of production, trade-offs, and opportunity cost based on the lecture notes.

Scarcity

The central issue of economics describing resources being finite and limited while wants are unlimited.

Factors of Production

The categories of resources used to produce scarce goods and services: Land, Labor, Capital, and Entrepreneurship.

Land

Any natural resource used for production, including renewable and nonrenewable resources like plants, water, metals, natural gas, and farm animals.

Labor

The physical or mental effort workers use to create finished products.

Wages and Salaries

The income earned by labor.

Capital

Man-made resources used to make other goods, often summarized as 'Capital goods make other goods'.

Physical capital

The tools and machines used to produce goods.

Human capital

The skills, knowledge, education, and experience of workers.

Financial capital

Money and investments.

Entrepreneurship

The ability to combine land, labor, and capital into usable products (goods or services) through innovation.

Trade-offs

Alternative options you could have chosen; every decision involves a gain and a loss.

Opportunity cost

The next best option that is given up when a specific decision is made.