Econ: What is Economics?

Economics

The study of the choices that individuals make in groups in the face of scarcity

Goods

Products and inanimate objects sold to consumers

Services

Skills and labor sold to consumers

Needs

What an individual has to have to survive

Wants

What an individual desires but does not need to survive

Scarcity

The fact that all resources on this earth are limited

Choice

The fact that because there is scarcity there must be a decision to fulfill each want.

Opportunity Cost

The trade off in a choice

Economic Good

A product that is payed for with money

Free Good

A good that is so abundant that it is free

What are the three basic economic problems?

Who do we produce for?
What do we produce?
How do we produce it?

What are the factors of production

Land
Labor
Capital
Entrepreneurship

Production Possibilities Curve

A graph describing the most efficient use of two scarce materials

Total Utility

The satisfaction that a product gives its consumer

Marginal Utility

The idea that the more of a product is consumed, the less satisfaction it provides

Microeconomics

The study of individual markets and their systems

Macroeconomics

The study of entire countries and their markets

Positive Economics

A statement in economics that explains a fact.

Normative Economics

A statement in economics that describes how things should be

Ceteris Paribus

All variables except those discussed are held constant

Circular Flow Model

A model which details how money is used and then brought back into the economy

What are the two Rationing Systems

• Free Market Economy

• Planned Economy

Free Market Economy

A market where the government doesn’t interact.

Planned Economy

A market completely controlled by the government with fixed prices

Rational Economic Thinking

A theory that believes that all individuals will decide the option that will bring them the most satisfaction

How is Economic Growth measured

• Households

• Firms

• GDP

• GNI

• HDI

Households

Another name for consumer, the people buying products

Firms

The people creating the products

Real National Income

All of the money earned in a country accounted to inflation

Gross Domestic Product

All profits in a country

Gross National Income

All income made in a country

How is Economic Development measured

HDI(Human Development Index)

Human Development Index

An index describing the life expectancy and general quality of life inside of a country

Sustainable development

Consuming resources in a fashion that won’t result in a shortage in the future

Efficiency

To make something produce the most outputs with the least inputs or in the fastest manner

Economic Well Being

Are people able to live off of their wages and are their wages secure?

Equity

Equality for all, more of a consideration than an actual concept

Change

The fact that nothing stays the same and that the economic market will have to adapt to these circumstances

Interdependence

The situation that arises because of specialization, individuals must trade their products for others

Intervention

Government interference in the economy to try and prevent market failures