Intro to Economics Part one

Economics

The social science that deals with how a society allocates its scarce resources among us unlimited wants and needs

Social Science

Study, analyze, predict, and explain

Allocate

Proces of choosing which needs to be satisfied and how much of our resources will be used to satisfy them.

Scarcity

Condition when wants and needs are unlimited while resources needed to produce goods and services (goods and services) to meet wants and needs are limited

Shortage

Goods and services is unavailable at currently prices

Want

Desire but not essential for survival

Need

Necessary for survival and basic functioning, such as food, water, and shelter.

Goods

Physical Object we buy and use.

Durable

Long lasting

Planned Obsolescence

Good becoming non-functional or outdated after a certain time

Service

Action/activity one performs for another

Firm

Those that make goods and services

Consumers

These that buy and use good and service

Production Possibilities Graph

A graph showing the alternate was an individual or society uses its resources

Frontier

The Line connecting all the possible outputs on the Production Possibility Graph

Maximum possible output under normal circumstances

All or Nothing

The two points where the Frontier Line intersects with each axis

Thinking at the Margin

Movement along the Frontier Line between any two points.

Either direction

Deciding whether to do/use an additional unit of your resource.

Efficiency

Any specific point on the Frontier Line

Using resources in such a way as to maximize the production of goods and services

Underproduction

Any point below the Frontier Line

Using fewer resources than you are capable of using

Overproduction

Any Point above the frontier line

A “temporary impossibility” - economy is working beyond its normal capabilities

Growth

Shifting of the frontier line to the right

More resources, new equipment, better techniques, etc.

A new frontier line

Decline

Shifting of the frontier to the left

Less resources, outdated equipment, budget cuts, etc.

Opportunity Cost

The most desirable alternative given up when making a choice.

The value of the opportunity lost

The next most desirable alternative

COST IS WHAT YOU LOST

Opportunity Benefit

What is gained by making a choice

BENEFIT IS WHAT YOU GIT