Unit 1: Introduction to Economics

Economics

a social science which focuses on how people interact and exchange with each other to improve their well-being, using available resources.

Interdependence

people and countries interact with each other and rely on each other

Economic well-being

quality of life or standard of living

Change

the world is dynamic

Scarcity

resources are limited; the fundamental economic problem

Choice

we are forced to select between different outcomes

Sustainability

concerns over how long economic conditions can be maintained

Equity

fairness

Efficiency

maximizing outcomes

Intervention

government’s role in affecting the economy

Allocation of Resources

the distribution of the 4 factors of production

Four Factors of Production

the four categories of resources: land, labor, capital, and entrepreneurship

Opportunity Cost

the loss of potential gain from the next best alternative to a chosen action

Free Good

a good that is not scarce and thus has no opportunity cost

Laissez Faire

the concept of the government taking a hands off approach to the economy