Econ test review

Cost vs. Benefit

It means comparing what you give up (cost) with what you gain (benefit).

Normative Economics

Economics based on opinions or “what should be,” not just facts.

Opportunity Cost

The most valuable alternative you give up when making a choice.

Tradeoff

Giving up one option in order to gain another.

Productivity

How efficiently resources are used to produce goods and services (output per input).

Entrepreneur

A person who organizes resources, takes risks, and creates businesses.

Factors of production

The fundamental resources that are used to produce goods and services.

Land: natural resources (oil, soil, water)

Labor: human work, physical or mental

Capital: man-made tools/machines

Entrepreneurship: risk-taking and organizing production

Scarcity

The lack of resources to meet unlimited wants.

Diminishing Marginal Utility

Each additional unit of a good gives less added satisfaction than the previous one.

Utility

The satisfaction or benefit you get from consuming a product.

Free resource

Something that doesn’t cost money, time, or labor.

Inputs

The scarce resources (factors of production) used in the production process.

Outputs

The goods and services produced using resources.

Perpetual Resources

Natural resources that are unlimited and will not run out

Renewable Resources

Natural resources that can be replaced if used carefully

Non renewable Resources

Natural resources that cannot be replaced once used

Human capital

The knowledge and skills people gain from education, training, and experience that make them more productive.

Financial Capital

Money used to invest in stocks, bonds, or businesses, but it does not directly produce goods and services.

Physical Capital (Capital Goods)

The tools, machines, and buildings used to produce goods and services.

Consumer goods

bought for personal use

Marginal Utility

 Is the extra satisfaction or pleasure you will get from an increase of one additional unit of a good or service.