Microeconomics Unit One

Scarcity

The state of having limited resources but unlimited wants and needs

Resources

Scarcity

The state of having limited resources but unlimited wants and needs

Resources

Product Markets

Where consumers purchase good and services

Revenue

The payment a business recieves for their goods and services

Factor Market

Where businesses purchase what they need to produce their goods and services

The Factors of Production

The resources needed for businesses to produce goods and services

Capital

Resources the improve productivity

Subsidy

Money granted by the government to businesses in order to influence their behavior

Transfer Payment

Money granted to households by the government in order to influence their behavior in some way

Consumer Goods

Products purchased for direct use

Capital Goods

Products used by a business in order to produce consumer goods and services

Production Possibilities Curve (PPC)

A graph illustrating the possible output combinations of two goods based on a set amount of resources

Opprotunity Cost

The next-best alternative sacrificed or foregone in any choice

Law of Increasing Opprotunity Cost

As you continue to increase production of one good, the opprotunity cost of producing the next unit increases

Comparative Advantage

The ability to produce something with a lower opprotunity cost

Explicit Costs

Expenses directly spent on an action

Implicit Costs

The most valuable economic activity that did not occur because of a choice

Utility

Broadly means usefulness, but specifically personal satisfaction

Coordinating Mechanism

The whole set of institutions that determine resource allocation

Command Economy

Central planning by the government using involuntary laws, taxes, regulations, and restrictions

Market Economy

Price determined by voluntary negotiation of buys and sellers. Protections for private ownershi and control of resources by households and businesses

Law of Diminishing Marginal Utility

As more and more of an input is used in the short-run production, the marginal product eventually declines