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Introduction to IB economics, UNIT 1
Economics
The social science that studies the relationship between humans and the economy using past experiences and observations.
Limited Resources
The finite amount of resources available to humans to satisfy their unlimited needs and wants.
Scarcity
The fundamental concept of limited availability of resources in relation to our unlimited wants.
Opportunity Cost
The concept of what is foregone in order to gain something else.
Efficiency
The optimal use of resources to minimize resource waste.
Equity
The fair distribution of resources, rather than equal distribution.
Economic Well-Being
The multidimensional concept relating to the prosperity level and quality of living standards of people.
Sustainability
Using resources in a way that does not compromise the needs of future generations.
Change
The constant changes in the economic world that economists need to be aware of in their models.
Interdependence
The concept that economic actors interact with each other and are interdependent.
Intervention
When market powers fail to meet social goals, governments intervene to control choices.
Central Economic Problem (Scarcity)
The friction between unlimited needs and limited resources.
Wants
Desires for goods and services expressed as consumer demand in markets.
Needs
Goods and services required to meet basic needs.
Resources
Factors of production used to create goods and services.
Land
Resources needed to produce goods and services.
Labor
Skilled or unskilled human efforts used in production.
Capital
Machinery, tools, or money used to make a profit.
Entrepreneurship
The combination of all factors of production to organize planning and allocation.
Basic Economic Questions
What, how much, how, and for whom to produce.
Allocation of Resources
The process of dividing factors of production to produce goods and services in an economy.
Opportunity Cost
The cost of what is foregone in order to obtain something.
Economic Goods
Goods that have economic value and require resources to consume or produce.
Free Goods
Goods that have no economic value and do not require resources to consume or produce.
Production Possibilities Curve (PPC)
A graphical model of the two products that an economy can produce given its resources and technology.
Circular Flow Model
A graphical model that explains the flow of money in a closed economy.
Injections
The inflow of money into the economy, such as government spending, financial sector incentivization, and exports.
Leakages
The outflow of money from the economy, such as taxes, savings, and imports.
Note 
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