WEEK 3 - CIRCULAR FLOW OF ECONOMICS ACTIVITIES

Household

A home and its occupants regarded as one unit

Final Good

A good that the final consumer consumes, i.e., a consumer good.

Intermediate Goods

The ingredients/ components of finished goods

Raw Materials

Materials or substances used in the manufacturing of goods.

Scarcity

A limited amount of resources to meet unlimited wants and needs.

capital

Things that are themselves produced and that are then used in the production of

other goods and services.

Factors of production (or factors)

The inputs into the process of production. Another word for resources.

inputs or resources

Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants.

outputs

Usable products.

TRADE OFFS

When you choose between two possible uses for a resource, giving up one alternative for another.

Opportunity Cost

• The potential benefits that an individual, investor, or business misses out on when choosing one alternative over another.

• the cost of the second best alternative given up to make a choice.

difference between trade-offs and opportunity cost

trade-off refers to the decision to pick an alternative, whereas opportunity cost refers to the value of the forgone alternative.