CH 1 ECON

Scarcity

The core economic problem arising from limited resources versus unlimited wants.

Economic questions

• what to produce

• how to produce

• for whom to produce

Gross Domestic Product (GDP)

A measure of all final goods and services produced within a nation.

Circular Flow of Economic Activity

Describes the movement of goods/services and money in the economy

Factor Markets

Where resources are traded.

Product Markets

Where goods and services are sold to consumers.

Productivity

Efficiency in producing outputs from given inputs.

Trade-off

The concept that in order to gain something, one must forgo another. It represents the choices made when selecting between two or more alternatives.

Opportunity Cost

The value of the next best alternative that is forgone when a choice is made. It quantifies the potential benefits lost when choosing one option over another.

Production Possibilities Frontier (PPF)

Comparison of 2 products. Represents all possible combinations of goods and/or services an economy can produce.

Cost-Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives, used to determine options that provide the best approach to achieving benefits while preserving savings. It involves comparing the costs and benefits of a decision to evaluate its feasibility and profitability.

Free Enterprise Economy

An economic system where private businesses operate in competition and largely free of state control. It operates under the principles of supply and demand with minimal government intervention.

Standard of Living

The degree of wealth and material comfort available to a person or community, typically measured by the availability of goods, services, and luxuries available to individuals or households in relation to their needs and desires.

Specialization

Measure of amount of output produced by a given amount of inputs in a specific period of time

Marginal utility

Usefulness of the next unit

Soft landing

Central bank able to bring inflation down a hot economy without setting off a significant decline in economic activity, or recession.