1st Period Economy Notes

Economics

The social science that studies how people make choices among alternatives.

Goods

Tangible items that can be touched, seen, consumed, and last a long time.

Services

Intangible items that cannot be touched but satisfy a want or need.

Needs

Goods or services that are necessary for survival.

Wants

Goods or services that are not necessary but desired.

Scarcity

The condition of having limited resources and having to choose among alternatives.

Factors of production

The resources used in the production process, including natural resources, capital resources, and human resources.

Opportunity cost

The value of the alternative that is given up when making a choice.

Economics

The study of how society distributes its limited resources.

Microeconomics

The study of individual and business decisions, focusing on supply and demand.

Macroeconomics

The study of the economy as a whole, including factors such as unemployment, inflation, and GDP.

Facts

Verifiable statements that can be confirmed statistically.

Values

Statements based on personal beliefs and opinions.

GDP

Gross Domestic Product, the total value of all final goods and services produced within a country in one year.

Expenditure approach

Calculating GDP by adding up the total spending on goods and services.

Income approach

Calculating GDP by adding up all the income earned by factors of production.

Drawbacks to GDP

Population size, non-market production, underground economy, types of goods produced, leisure, environmental deregulation, and distribution of income.

Production possibilities curve

A graphical representation of the possible output combinations for an economy.

Law of increasing opportunity cost

The concept that as the production of one good increases, the opportunity cost of producing additional units of that good increases.

Economic growth

An increase in the production possibilities of an economy due to more resources or improved technology.

Business cycle

The fluctuations in economic activity, including periods of growth, recession, slump/depression, and recovery.

Saving

Putting money aside for future use.

Investing

Using savings to earn extra income.