Microeconomics Unit 1 - Basic Economic Concepts

This set of flashcards includes key vocabulary terms and definitions relevant to the first unit of microeconomics, covering essential concepts such as scarcity, factors of production, opportunity cost, and comparative advantage.

Scarcity

The idea that individuals and society have unlimited wants/desires but limited resources.

Factors of Production

The resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Physical Capital

Tools, machines, or manufacturing equipment used to produce goods and services.

Human Capital

Skills and experience that workers need to produce goods and services.

Command Economy

An economic system where the government owns resources and answers the three economic questions, with very little private property.

Market Economy

An economic system where individuals own resources and answer the three economic questions, with little government involvement.

Mixed Economy

An economic system that incorporates characteristics of both command and market economies.

Production Possibilities Curve (PPC)

A graph showing the different combinations of two goods that can be produced using all of a country's resources.

Opportunity Cost

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

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Absolute Advantage

The ability of a country to produce more of a good using the same resources than another country.

Cost-Benefit Analysis

A process of comparing the costs and benefits of a decision.

Marginal Analysis

Weighing the additional benefits and additional costs of a decision.