Introduction to Economic Principles and Scarcity

Scarcity

Condition that results from society not having enough resources to produce all the things people would like to have.

Economics

Social science dealing with how people satisfy seemingly unlimited and competing wants with the careful uses of limited resources.

Good

Tangible economic Product that is useful, relatively scarce, transferable to others, and used to satisfy wants and needs.

Service

Work/labor performed for someone.

Microeconomics

A branch of economics that studies the behavior of individual households and firms in making decisions on the allocation of limited resources.

Macroeconomics

Branch of economics that examines the behavior of economic aggregates - inflation, monetary policy, fiscal policy, supply and demand, employment, and so on a national scale.

Scarcity forces every society to answer

What to produce?

How to Produce?

For whom to produce?

Capital Goods

Things used to produce goods/services (machinery).

Consumer Goods

Goods intended for final use by consumers.

Four Factors of Production

Land, Labor, Capital, Entrepreneurship

Land

Refers to all natural resources.

Labor

Refers to the effort and skills of people who work to produce goods/services.

Capital

Refers to the tools, machinery, and other physical assets used to produce goods and services.

Entrepreneurs

Combine the other factors of production, land, labor, and capital to make a profit. They identify opportunities, organize resources and bring new products or services to the market.

Durable goods

Any good that lasts 3 years or more when used on a regular basis.

Nondurable goods

An item that lasts for fewer than 3 years when used on a regular basis.

Consumer

People who use goods and services to satisfy their wants and needs.

Value

The perceived worth or utility of a product or service to the buyer.

Utility

The capacity to be useful and provide satisfaction. Utility is not fixed or measurable.

Paradox of value

For something to have value it must have scarcity and utility.

Wealth

Accumulation of valuable economic resources that can be measured in terms of either real goods or monetary value.

Factor (resource) Markets

Where individuals earn income and factors of production are bought and sold.

Product Market

Producers sell their goods and services to consumers.

GDP

Dollar value of all final goods, services and structures produced in a country in a 12-month period.

Economic growth

Occurs when a nation's total output of goods and services increases over time.

Productivity

A measure of the amount of goods and services produced with a given amount of resources within a specific period of time.

Human Capital

The sum of people's skills, abilities, health, knowledge and motivation.

Division of labor and specialization

A way of organizing work so that each individual worker completes a separate part of the work.

Economic interdependence

Relying on others, and others relying on us to provide most of the goods and services we use.