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The Basic Economic Problem
The study of the use of limited resources to satisfy unlimited wants.
Macroeconomics
The entire economy.
Microeconomics
Individual firm/industry.
Opportunity Costs
Evaluating what you must give up when a particular choice is made. The next best alternative.
Rational Self Interest
We seek opportunities to maximize our satisfaction amongst the choices we have.
Land
Property and raw materials.
Labor
Workers.
Capital
The stuff and makes other stuff (like an investment).
Physical Capital
Factories, machinery, tools, etc.
Human Capital
Training/education.
Financial Capital
Moneyyyyy.
Entrepreneurial Ability
An innovator/risk taker. Create new products, techniques, or forms of business organizations.
Command Systems
The government plans the economy and handles all business.
Market Systems
Bring together buyers/consumers and sellers/producers.
Demand (Marginal Benefit)
Data showing the various amounts of a product, consumers are willing and able to purchase, at various prices during a specific period of time.
Law of Demand
It is an inverse relationship between price and quantity demanded.
Law of Diminishing Marginal Utility
As you consume more of a good the extra satisfaction declines.
Income Effect
When the price of a good decreases, your relative income increases and you can purchase more and vice versa.
Substitution Effect
At a lower price buyers have incentive to substitute what is now a less expensive product.
Determinants of Demand
Change in demand shifts the entire curve.
Population
The number of buyers either increases (shift right) or decreases (shift left).
Income
Higher income causes an increase in demand.
Expectations
When consumers anticipate an increase in price.
Substitutes and Complements
If the price of a substitute good increase, demand for the other increases.
Supply
The amount of a product a producer is willing and able to produce.
Disaster
Decrease in supply or expectations of future economic conditions.
Inputs
The cost of inputs or resource prices (CELL).
Government
Taxes, subsidies, and regulations.
Surplus
Quantity supplied exceeds quantity demanded.
Shortage
Quantity demanded exceeds quantity supplied.
