oh

Scarcity

The limited availability of resources to meet unlimited needs and wants.

Choice

The decision-making process societies undergo due to scarcity, leading to opportunity costs.

Efficiency

The optimal use of resources to minimize waste and maximize societal benefits.

Equity

Fairness in the distribution of income, wealth, and opportunities, distinct from equality.

Economic Well-Being

The quality of life and prosperity, including financial security and personal satisfaction.

Sustainability

practices that support long-term economic growth without negatively impacting social, environmental, and cultural aspects of the community

Change

In economics, "change" refers to the variation in key economic variables like prices, employment, or GDP, driven by factors such as market dynamics, policy shifts, technological advances.

Interdependence

Economic agents are deeply interconnected, meaning their decisions and actions influence one another.

Intervention

Refers to government actions in markets, such as taxes and subsidies, to correct market failures and improve societal outcomes.

Goods

Physical, tangible items produced to satisfy needs and wants.

Services

Intangible offerings that fulfill needs and wants.

Resources (Factors of Production)

Inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.

Land

Natural resources used in production, such as minerals and forests.

Labour

Human effort required for production, both physical and mental.(e.g. teachers and construction workers)

Capital

Manufactured resources like machinery and factories used in production.

Entrepreneurship

The ability to organize production factors to create goods and services, taking on buisness risks.

Opportunity Cost

The next best alternative for when a choice is made. It highlights the cost of choosing one option over another.

Economic Goods

Goods produced with scarce resources, involving opportunity cost.

Free Goods

Abundant items like air and sunlight that do not involve opportunity costs.

What to Produce?

The decision societies make regarding which goods and services to produce.

How to Produce?

Decisions about the methods and combinations of resources used in production (e.g., intensive vs. extensive agriculture).

For Whom to Produce?

Determines who gets to consume the produced goods and services, based on availability, need, or ability to pay.

Free Market Economy

An economic system where resources are privately owned and decisions are made by consumers and producers.

Centrally Planned Economy

An economic system where the government makes all economic decisions and resources are state-owned.

Mixed Economies

Economies that incorporate elements of both free markets and government intervention.

Production Possibility Curve (PPC)

A model illustrating the production capabilities of an economy with scarce resources.

• Assumptions:

  • Only two goods are produced.

  • The amount of resources and technology is fixed at a specific time.

Actual Growth

Actual growth occurs when a country increases its production of goods and services. If a country moves from point D to point G, as shown in Figure 2, it signifies actual growth. This transition means the country is now producing more of both good X and good Y by making greater use of its scarce resources.

Potential Growth

Occurs when the productive potential of an economy increases, enhancing its overall capability. This allows the economy to produce more goods and services at its maximum capacity than before.

• Causes of Potential Growth:

  • Increased quantity or quality of resources.

  • Technological improvements.

  
  

Increasing Opportunity Cost

A situation where the PPC is curved, indicating that not all factors are equally suited for producing both goods.

Constant Opportunity Cost

A situation where the PPC is a straight line, indicating factors are equally efficient in producing both goods.