Unit 1 Economics - Fundamentals of Economics (Scarcity, Production Possibilities, and Costs)

Vocabulary flashcards covering scarcity, factors of production, and production possibilities concepts from the lecture notes.

Scarcity

Forces us to make choices by deciding which options are most important; unlimited wants and limited resources.

Need

Something essential for survival.

Want

Something we desire but is not necessary for survival.

Goods

Physical objects produced for consumers, such as food, clothing, or video games.

Services

Actions or activities performed for others, such as medical care, haircuts, or waiter/waitress service.

Economics

The study of how people seek to satisfy needs and wants.

Shortage

A situation where consumers want more of a good or service than can be produced at current prices.

Entrepreneurs

People who decide how to combine resources to create new goods and services; any person who opens a business.

Factors of Production

Resources used to make all goods and services.

Land

Natural resources used to produce goods and services.

Labor

Effort of people devoted to tasks for which they are paid.

Capital

Human-made resources used to produce other goods and services.

Physical Capital

Human-made objects used to create other goods and services.

Human Capital

The knowledge, skills, and abilities of workers that contribute to production.

Efficiency

The use of resources in a way that maximizes the output of goods and services.

Underutilization

Using fewer resources than the economy is capable of using; producing less than the maximum.

Production Possibilities Curve (PPC)

A graph showing alternative ways to use an economy's productive resources and the categories of goods and services.

Production Possibilities Frontier (PPF)

The boundary showing the maximum possible combinations of production of two goods (e.g., hats and shoes) given resources.

Economic Growth

An increase in an economy’s capacity to produce, causing the PPF to shift to the right.

Efficiency (in Production Possibilities)

Maximizing output by using resources in the best possible way.

Underutilization (in Production Possibilities)

Producing at a level below the economy’s maximum potential.

Law of Increasing Costs

As production shifts from one item to another, more and more resources are needed to increase production of the second item, so opportunity costs rise.

Technology

Advances that increase a nation’s efficiency and production possibilities.

Training

Education and skill development that help people use new technologies and improve productivity.

Thinking at the Margin

Considering how much more or less to do; evaluating marginal changes in decisions.

Marginal Cost

The extra cost of producing one more unit.

Opportunity Cost

The most desirable alternative given up when a decision is made.

Trade-off

Giving up one benefit to gain another; can involve tangible or intangible costs and benefits.

Costs and Benefits

A framework for decision making that compares what is sacrificed with what is gained.