[Introduction to Economics]

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Introduction to IB economics, UNIT 1

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28 Terms

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Economics

The social science that studies the relationship between humans and the economy using past experiences and observations.

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Limited Resources

The finite amount of resources available to humans to satisfy their unlimited needs and wants.

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Scarcity

The fundamental concept of limited availability of resources in relation to our unlimited wants.

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Opportunity Cost

The concept of what is foregone in order to gain something else.

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Efficiency

The optimal use of resources to minimize resource waste.

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Equity

The fair distribution of resources, rather than equal distribution.

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Economic Well-Being

The multidimensional concept relating to the prosperity level and quality of living standards of people.

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Sustainability

Using resources in a way that does not compromise the needs of future generations.

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Change

The constant changes in the economic world that economists need to be aware of in their models.

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Interdependence

The concept that economic actors interact with each other and are interdependent.

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Intervention

When market powers fail to meet social goals, governments intervene to control choices.

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Central Economic Problem (Scarcity)

The friction between unlimited needs and limited resources.

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Wants

Desires for goods and services expressed as consumer demand in markets.

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Needs

Goods and services required to meet basic needs.

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Resources

Factors of production used to create goods and services.

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Land

Resources needed to produce goods and services.

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Labor

Skilled or unskilled human efforts used in production.

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Capital

Machinery, tools, or money used to make a profit.

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Entrepreneurship

The combination of all factors of production to organize planning and allocation.

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Basic Economic Questions

What, how much, how, and for whom to produce.

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Allocation of Resources

The process of dividing factors of production to produce goods and services in an economy.

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Opportunity Cost

The cost of what is foregone in order to obtain something.

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Economic Goods

Goods that have economic value and require resources to consume or produce.

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Free Goods

Goods that have no economic value and do not require resources to consume or produce.

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Production Possibilities Curve (PPC)

A graphical model of the two products that an economy can produce given its resources and technology.

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Circular Flow Model

A graphical model that explains the flow of money in a closed economy.

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Injections

The inflow of money into the economy, such as government spending, financial sector incentivization, and exports.

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Leakages

The outflow of money from the economy, such as taxes, savings, and imports.