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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.
