H ECON PPC (copy)

Cost/positive economic cost

An economic cost isthe sum of explicit out-of-pocket expenses and implicit opportunity costs tied to a choice

Marginal Cost/Benefit

value gained or lost by adding or subtracting 1 more thing

Opportunity cost/benefit

next best option after choice —> measured in loss

Trade-off

choice you make w 2 scarce resources

Utility

the satisfaction one receives

Intrinsic value

the actual or true worth of an item or product

Subjective Value

an economic concept stating that the worth of an item or service comes from personal perception rather than its production cost.

Scarcity

a small supply or a lack of enough resources to meet people's needs and wants, limited resources relative to demand/ forces choice or compromise

Positive goods and services

items or activities that provide extra benefits to people who did not buy or make them

ex- education, healthcare, public transit

Nuisance Goods and Services

Goods that consumers pay to have removed and that bear a negative economic cost

garbage truck: nuisance service, landscaping

paper towels: nuisance good

  Free Goods and Services                   

price tag of 0$ and abundant in supply

free good: water, air, sunlight,

free service: libraries

Factors of Production

LAND

LABOR

CAPITAL

ENTREPRENEURSHIP

Input and Output Goods        

Input goods are the raw materials and resources used to create a product, while output goods are the final finished products ready to be sold

Input Goods

• Definition: The ingredients, parts, or resources that enter the production process.

• Role: They act as the costs and building blocks required to make something new.

• Examples: Flour, sugar, and eggs used to bake a cake, or steel and rubber used to build a car.

Output Goods

• Definition: The final goods or services created after the production process is complete.

• Role: They are the results delivered to consumers or other businesses to generate revenue.

• Examples: A freshly baked cake, a completed automobile, or a packaged smartphone.

Label, graph, and explain what a Production Possibilities Curve is and how it depicts scarcity

a graph that shows the highest amount of two different goods an economy can produce when it uses all its available resources and time.

How to Label the Graph

• Vertical Axis (Y-axis): Label this line with Good A (for example, Computers).

• Horizontal Axis (X-axis): Label this line with Good B (for example, Pizzas).

• The Curve (Line): A bowed-out line that curves down from the Y-axis to the X-axis. This line shows the limits of production.

• Point Inside the Curve (Point X): An area showing wasted time or unused workers (inefficiency).

• Point On the Curve (Point Y or Z): A spot right on the line showing the best and fullest use of resources (efficiency).

• Point Outside the Curve (Point W): A spot floating past the line showing a goal that is impossible to reach right now.

How the Curve Depicts Scarcity

• Limited Resources: An economy only has a set amount of workers, tools, and land. It cannot make an infinite number of things.

• The Boundary Line: The curve itself acts as a wall. It proves that resources are scarce (not enough to satisfy every desire).

• Trade-Offs (Opportunity Cost): Because resources are scarce, making more of Good A means you must give up some of Good B. You cannot increase both at the same time once you are on the line.

Understand the assumptions that a PPC is based

based on 2 goods,

fixed resources (total quantity and quality of society's economic resources—including land, labor, capital, and entrepreneurship—remain constant during the period of analysis),

Imperfect adaptability (variable substitution): Resources are not equally efficient or well-suited for producing both goods. As production shifts from one good to the other, it results in an increasing opportunity cost, giving the curve its characteristic bowed-out (concave) shape.

Identify points that are currently unattainable and inefficient on a PPC

points under/ inside the graph are inefficient (not using total amount of resources)

points outside of graph/ line are unattainable (don’t have enough resources to grow)

Find opportunity cost on a PPC

calculate what you must give up of one good to get more of another when moving between points on the curve

Know the meaning of convex and straight PPCs

Convex- a graph bowed inward toward the origin that shows decreasing opportunity cost as an economy shifts production from one good to another

straight- A straight-line Production Possibility Curve (PPC) implies that the opportunity cost of producing one more unit of a good remains constant as production shifts from one good to another

4 factors of production (LAND)

-natural resources-

soil

water

sunlight

cows

4 factors of production (LABOR)

human effort-

mining

barista

teaching

4 factors of production (CAPITAL)

-goods used to produce other goods/ services

1- FINANCIAL CAPITAL- $ loaned to businesses

2- PHYSICAL CAPITAL- tools/ materials that make the product

3- HUMAN CAPITAL- knowledge, experience/ degrees that go into producing

ex- $(loan) —> fords factory —→ employees design = trucks

4 factors of production (Entrepreneurship)

combines all the other factors to produce smth (RISK)