Applied Economics

Economics

A social science that deals with the allocation of scarce resources to satisfy man’s unlimited needs and wants

Scarcity

insufficiency of resources to meet all the needs and wants of a population

Relative Scarcity

a good is scarce compared to its demand

Absolute Scarcity

supply is limited

Trade Off

choosing one thing over the other possibilities

Opportunity Cost

refers to the value of the best forgone alternative

Opportunity Cost

Value of things that could have gained from alternatives that were not selected

Economic Resources

“factors of production“

Economic Resources

Resources used to produce goods and services

3 Economic Resources

1. Land

2. Labor

3. Capital

Land

Soil and natural resources

Rent

payment for land owners

Labor

physical and human effort exerted in production

Wage

income received in labor

Capital

man made resources in production of goods

Interest

income in capital