Chapter 1

1.1 and 1.2 quiz (8/29/24)

scarcity

• we have unlimited wants and needs but limited resources

  • ALWAYS EXISTS

shortage

• quantity supplied < quantity demanded at current price

• TEMPORARY

guns and butter

countries make decisions towards military spending or other resources

factors of production

1) land

2) labor

3) capital

4) entrepreneurship

land (examples and payment)

ex. soil, water, plants, animals

payment=rent

labor (examples and payment)

ex. human effort, work

payment=wages

capital (examples and payment)

ex. machinery, tools, equipment used to make goods and resources

payment=interest

entrepreneurship (examples and payment)

ex. innovators (new ways to use land, labor, capital)

payment=profitt

trade-offs

alternatives you give up when you make a decision

opportunity cost

next best decision foregone