Fundamentals of Economics Review

Flashcards covering key economic concepts such as scarcity, factors of production, opportunity cost, and production possibilities.

Economics

The study of how individuals, businesses, and governments make choices when faced with a limited supply of resources.

Need

Something essential for survival.

Want

Something desired but not necessary for survival.

Goods

Physical objects that satisfy needs and wants.

Services

Actions or activities performed for others to satisfy needs and wants.

Scarcity

The condition where limited amounts of goods/services are available to meet unlimited needs/wants, forcing people to make choices.

Factors of Production

Scarce resources that are turned into goods and services.

Entrepreneurs

Individuals who decide how to manipulate resources to create new goods and services, taking risks to be more profitable/successful.

Land

All natural resources used to produce goods and services.

Labor

Effort people devote to tasks for pay.

Capital

Human-made resources used to produce goods and services.

Physical Capital

Man-made objects used to produce goods and services.

Human Capital

Knowledge and skills acquired through education and experience.

Trade-offs

The act of giving up one benefit in order to gain another, greater benefit.

Opportunity cost

The most desirable alternative given up as the result of a decision.

Thinking at the margin

When you decide how much more or less to do, comparing opportunity costs and benefits.

Cost/benefit analysis

Weighing the marginal costs (adding a unit) against the marginal benefits (benefit of added unit).

Production possibilities curve (PPC)

Graph that shows alternative ways to use productive resources.

Efficiency

The use of resources in such a way as to maximize the output of goods or services.

Underutilization

Producing fewer than capable of using.

Law of increasing costs

As production shifts from one item to another, more resources are necessary to increase production of the second item…opportunity cost increases.