Economics Fundamentals: Scarcity, Resources, and Decision-Making

What does economics begin with?

The idea that people cannot have everything they need and want.

What are goods?

Physical objects that someone produces.

What are services?

Actions or activities that one person performs for another.

What is the definition of economics?

The study of how people choose to satisfy their wants and needs with scarce resources.

What is scarcity?

Limited amounts of goods and services available to meet unlimited wants.

How is scarcity different from shortage?

Scarcity always exists, while a shortage is temporary and occurs when supply cannot meet demand.

Why does scarcity force people to make choices?

Because limited goods and services must be allocated to satisfy the most important wants.

What are factors of production?

The scarce resources used to make all goods and services.

Why are all goods and services scarce?

Because the resources used to produce them are limited.

What is land in economics?

All natural resources used to produce goods and services (e.g., water, oil, forests, farmland).

What is labor?

The effort people devote to tasks for which they are paid (e.g., teaching, medical care, barista work).

What is capital?

Human-made resources used to produce other goods and services.

What are examples of physical capital?

Tools, machinery, buildings, and cash.

What are examples of human capital?

Knowledge, education, training, and job experience.

What are benefits of capital?

Increased efficiency, better time management, greater productivity, and more knowledge.

Who are entrepreneurs?

Ambitious leaders who decide how to combine land, labor, and capital to create goods and services.

What role do entrepreneurs play in the economy?

They turn scarce resources into goods and services, take risks, and drive innovation.

What do entrepreneurs do?

Identify problems/needs, start businesses, create new industries, and fuel economic growth.

How do entrepreneurs drive economic growth?

Through innovation, job creation, and wealth generation.

How much of the world's jobs are created by entrepreneurs?

90%.

What percentage of the world's billionaires are self-made?

62%.

What is a trade-off?

Giving up one benefit in order to gain another.

Why does every decision involve a trade-off?

Because choosing one option means sacrificing the chance to do something else.

What are some measurable trade-offs?

Money, time, or property.

What are some non-measurable trade-offs?

Enjoyment, job satisfaction, or experiences.

What trade-offs do businesses face?

Deciding how to use land, labor, and capital (e.g., planting broccoli instead of squash).

What trade-offs do governments face?

Choosing between military spending and domestic spending.

What is opportunity cost?

The most desirable alternative given up when making a decision.

Why are opportunity costs important?

They represent the potential benefits lost when choosing one option over another.

What is the opportunity cost when you sleep in late?

Losing the chance to study an extra hour or do another productive activity.