Economics: Scarcity, Productive Resources, and Choices

These flashcards cover the fundamental vocabulary of introductory economics, including scarcity, the four factors of production, allocation strategies, and the concepts of trade-offs and opportunity costs.

Scarcity

having unlimited wants and needs but limited resources; an item must be both limited and desirable/wanted to meet this condition.

Shortage

A temporary lack of a resource, different from scarcity which always exists.

Productive Resources (Factors of Production)

Resources used to make goods and services, categorized into land, labor, physical capital, and entrepreneurship.

Natural Resources (Land)

Things from nature used to make products, such as trees, water, oil, and minerals.

Human Resources (Labor)

The people who do the work (Labor) and the skills and abilities they bring to their work (Human capital).

Human Capital

The specific skills and abilities that people bring to their work, such as a carpenter knowing how to build furniture.

Physical Capital

Tools and equipment used to make things, such as machines, buildings, and computers; this category does NOT include money.

Entrepreneurship

The person who brings other resources together to create or produce something while taking the financial risk, such as Steve Jobs.

Allocation Strategies

The various methods used to decide who receives a scarce item or resource.

Price

An allocation strategy where whoever is willing and able to pay gets the resource; usually, the more scarce and desirable an item is, the higher this becomes.

Supply

The quantity of a good or service that sellers are willing to sell.

Demand

The quantity of a good or service that buyers are willing to buy.

Authority

An allocation strategy where a person in power (such as a government, boss, or parent) decides who gets a resource; North Korea is a government example.

Lottery

An allocation strategy where winners are chosen randomly and everyone has an equal chance, based on luck.

Force

An allocation strategy where someone takes a resource without a voluntary exchange, which can include theft, bullying, or war.

Sharing

An allocation strategy where a resource is divided so that multiple people receive a portion.

First Come, First Served

An allocation strategy where the resource is distributed to whoever arrives first; often associated with waiting in lines.

Majority Rule

An allocation strategy where a group votes to decide how a resource will be distributed.

Personal Characteristics

An allocation strategy where resources are distributed based on a person's need or merit, such as government financial assistance.

Contest

An allocation strategy where the winner of a competition (e.g., fastest runner or highest GPA) receives the resource.

Trade-Offs

ALL the alternatives that are given up when a particular choice is made.

Opportunity Cost

The specific NEXT BEST alternative or the "number two" choice that is given up when making a decision.

Incentive

Something that motivates an individual to take or avoid a specific action.

Positive Incentive

A reward or benefit that encourages an action, such as receiving $10 for doing chores.

Negative Incentive (Disincentive)

A cost or consequence that discourages an action, such as a speeding ticket.