1. what is economics?

what is economics?

a social science that studies how to face scarcity while allocating limited resources to fulfill unlimited wants and needs → it studies the interaction of humans in the commercial market

opportunity cost

a trade-off, what individuals are losing when making choices → the cost of foregoing a second best option when making a decision

marginal utility

the additional satisfaction that comes from personal use → the first unit of something consumed will be more satisfactory than the second unit, third unit, and so on

invisible hand

the unseen forces that move the free market economy and influence business decisions

ceteris paribus

all other variables are equal or constant → the effect that one economic variable has on another, given all other variables remain the same

the problem of scarcity

esources are limited while human wants and needs are unlimited, forcing individuals to make decisions and being faced with opportunity costs

less resources available

→ more scarcity → more expensive products

supply

• at higher prices, producers will supply more

• producers do not set the price of their products, the market does

law of supply

→ there is a positive relationship between quantity supplied and price

demand

• quantity of goods and services that people are willing to buy at different prices

law of demand

→ there is a negative relationship between quantity demanded and price

market equilibrium

the intersection point between the demand and supply curve