LESSON 01 l ECONOMICS
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30 Terms
Economics
The efficient allocation of the scarce means of production toward the satisfaction of human needs and wants.
Scarce
The production refers to our economic resources like land, labor, and capital, which we use to produce all the goods and services that we need and want.
Efficient Allocation
Using those limited resources wisely, without wasting them.
Human Needs and Wants
The things that people can't live and live without.
Oikos
Household
Nomus
System or Management
Oikonomia (or Oikonomus)
Management of Household
Microeconomics and Macroeconomics
Economics
Has 2 main branches:
Microeconomics
Studies how individuals, families, and businesses make decisions about using resources.
Example: Managing a household.
Macroeconomics
Studies the whole economy of a country.
Includes:
Inflation
Unemployment
Economic Growth
Scarcity
Basic problem in Economics. There are not enough resources to satisfy everyone's unlimited wants and needs.
Resource Allocation
Process of deciding how to use limited resources in the best and most efficient way.
Scarcity
Limited Resources + Unlimited Wants =
Why Economics Exists
If resources were unlimited, everyone could have everything they wanted.
There would be no scarcity.
There would be no need to study Economics.
Land
Labor
Entrepreneurship
Capital
4 Factors of Production (LLEC)
Resources needed to produce goods and services.
Land
Refers to all natural resources provided by nature. Provides raw materials used to make products.
Rent
Usually short-term (month-to-month).
Can be changed or ended easily.
Lease
Usually long-term (6 months, 1 year, or more).
Has a fixed contract that both parties must follow.
Labor
Refers to human work or effort used to produce goods and services.
Capital
Refers to man-made tools and equipment used to produce goods and services.
Money
It is NOT considered capital in Economics because it doesn't directly produce goods. It is only used to buy things.
Interest
Payment for capital =
Entrepreneurship
Refers to the ability to start, organize, and manage a business.
Entrepreneur
It combines Land, Labor, and Capital to produce goods or services.
Entrepreneur
Takes risks and makes important business decisions.
Profit
Payment for entrepreneurship =
Profit
Reward for running a business.
Entrepreneur
A person.
Entrepreneurship
A process or skill.
Entrepreneurship
Why is this the Most Important Factor of Production?
It organizes the other three factors of production (LLC):
Land
Labor
Capital