Economic Decision Making and Factors of Production

These flashcards cover key economic concepts including scarcity, opportunity cost, rational choice, and factors of production.

Scarcity

The condition of having unlimited wants and limited resources.

Opportunity Cost

The value of the next best alternative that is sacrificed when a choice is made.

Rational Choice

A choice that results in more positive than negative consequences.

Cost-Benefit Analysis (CBA)

A process of weighing out the pros and cons of a decision to increase the chances of making a rational choice.

Factors of Production

The four inputs (land, labor, human capital, and physical capital) needed to produce goods and services.

Land (Factor of Production)

Natural resources used in the production of goods and services.

Labor

Human effort applied to the production of goods and services.

Human Capital

The knowledge and skills a worker gains through education and experience.

Physical Capital

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

Consequence

The result or effect of a decision, which can be positive or negative.