Personal Finances

What is Scarcity?

The fundamental problem facing all people; unlimited wants and limited resources to satisfy those wants.

What is a basic economic problem?

Humans’ wants and needs are infinite, while the resources needed to satisfy those wants and needs are limited and scarce

What makes something scarce?

Something is scarce when it’s both limited and desirable

Who does scarcity apply to?

Scarcity applies to everyone

What does scarcity represent?

Scarcity represents permanent problems that cannot be solved.

What is economics?

The study of choices; how individuals and groups seek to satisfy their wants and needs in light of scarcity

What are the four factors of production?

Land, Labor, the three types of capital goods, and entrepreneurship.

What is Land?

Natural resources not created by human effort that are used to produce goods and services.

What is Land also known as?

The “gift of nature”

What is Labor?

Time and effort devoted to producing goods and services.

Who does the Labor?

“The Workers”

What are the types of Capitals?

Physical, Human Capital, and Finacial capital.

What is physical capital?

Capital goods, human made objects that are used to create other goods and services.
Such as: Phones, Machines, Computers and equipment

What is human capital?

The skills, abilities, and specialized talents of people.
Such as: College, Training, and Technical School

What is financial capital?

Money, used by businesses to invest in their business.
Such as money

What is Entrepreneurship?

Business owners who organize the factors of production to bring stuff to the market.

What are entrepreneurs known as?

The “risk takers” who produce a good or service that they believe will succeed in the marketplace.

What is a Need?

A basic requirement for survival

Example: Food, clothing, housing etc.

What is a Want?

Not a basic requirement for survival; a means of expressing a need

Examples: Cheeseburger, Finch, Luxury, etc.

What is a Good?

A physical, tangible (touchable), product
Examples: Automobiles, Video Games, Phones, etc.

What is a Service?

A non-tangible action or activity that is performed for someone else.
Examples: Financial advisor, Stockbroker, movies, Dentist, Teachers, etc.

What is a Trade off?

Giving up one thing in order to gain another.

Who faces tradeoffs?

Everyone

What is Opportunity cost?

Used by economics o measure the cost of decision making; the value of what we give up
The next best alternative use of money, time, and resources.

What is a margin?

An increment (small unit) a border/edge

Wat does “Thinking at the margin” mean?

Analyzing the costs and benefits of incremental decisions.

What is Marginal Cost?

The incremental cost of decision making.

What is Marginal Benefit?

The incremental benefit of decision making

What is Incentive?

Motivating factor to decide

What does a Production Possibilities Curve Model (PPC) show?

That nothing is free and that everything has an opportunity cost/

If society wants more of one thing, then it must give up something in return.

Used to show opportunity cost