Unit 1: Economic Thinking

Scarcity Unit- List terms

Economics
Scarcity
The Fundamental Economic Problem
Wants vs needs

The Fundamental Economic Problem

Society has unlimited want but Society had limited needs

Answer to the Fundamental Economic Problem

Accept we can't have every want we desire, we must prioritize and choose.

scarcity

There are not enough resources for everyone to have everything that they want

economics

the study of choices we make in response to scarcity

Rationing Unit- List Terms

Rationing
The 3 Basic Economic Questions
Land
Labor
Human Capital
Physical Capital
Entrepreneur

Rationing

Dividing our limited resources to satisfy some of our unlimited wants

Characteristics of a good rationating system

1. Everyone has an equal chance to participate/win
2. It is based on merit
3. It considers people's needs/wants

Money

Allows individuals to consider the alternatives in light of their own circumstances, situation, and values; encourages us to change behaviors; and conserve

Factors of production

Land- natural resources
Capital - tools
Labor - the workers
Entrepreneur - people who bring the other factors together to create goods and services

Cost Benefit Analysis

A way of thinking that compares the cost and benefit of an auction

When should an action be taken?

Only when the benefits outweigh the costs

Opportunity Cost

The most desirable alternative given up as the result of a decision OR cost from choosing one option over another

Sunk Cost

An upfront cost you cannot get back regardless of your actions

No Free Lunch

Everything costs, even if its only time. The time to eat your lunch is a cost

Utility

The benefit of doing something

Marginal Analysis Unit

Margin

Extra, additional, difference

marginal utility

The extra(margin) usefulness or satisfaction a person gets from acquires, the less satisfaction he or she will receive.

Law of Diminishing Return

The more units of a certain economic product a person acquires, the less satisfaction he or she will receive