[Introduction to Economics]

Economics

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.