Basic Economic Concepts and Production Overview

Scarcity

Limited resources but unlimited wants, causing the fundamental economic problem.

Opportunity Cost

The value of the next best alternative given up when making a decision.

Trade-Offs

All alternatives sacrificed when choosing one option.

Trade-Off vs. Opportunity Cost

Trade-Off: Giving up all alternatives. Opportunity Cost: The most valuable alternative given up.

Need

Essential for survival (food, water, shelter).

Want

Something desired but not necessary (video games, luxury items).

Factors of Production

1. Land - Natural resources (oil, farmland). 2. Labor - Human effort (workers). 3. Capital - Tools, equipment, factories. 4. Entrepreneurship - Innovation and business creation.

Financial Capital

Money used to produce goods and services.

Products

Goods - Physical items (cars, phones). Services - Paid actions that help people (haircuts, tutoring).

Production Possibility Frontier (PPF)

A graph showing the maximum possible output of goods/services an economy can produce with available resources.

Raw Goods Producers

Extract natural resources (farmers, miners).

Middlemen

Connect producers and retailers (wholesalers, distributors).

Retailers

Sell goods directly to consumers (Walmart, Amazon).

Stock

Ownership in a company.

Common Stock

Voting rights, dividends depend on profits.

Preferred Stock

Fixed dividends, no voting rights.

Dividend

A company's profit shared with stockholders.

Bond

A loan to a company or government with fixed interest payments.

Gross Domestic Product (GDP)

The total value of goods and services a country produces in a year. Formula: GDP = Consumer Spending + Business Investment + Government Spending + (Exports - Imports). Higher GDP = Stronger economy.