Econ part 1

Economics

Economics

``````````````````````````````````````````````The study of how people seek to satisfy their needs and wants by making choices.

Scarcity

Limited amounts of goods and services that are available to meet unlimited wants.

TINSTAAFL

“There is no such thing as free lunch” acronym for the idea that everything has a cost forces us to have to make choices.

Shortage

When consumers want more of a good or service than producers are willing to make available at a particular price.

Goods

Physical objects that someone produces ex. food clothing video games

services

actions or activities that one person performs for another usually for a fee ex. medical care

Factors of production

The resources used to make all goods and services.

Land

All natural resources used to produce goods and services ex. water, iron, coal, forests

Physical capital

All human made goods that are used to produce other goods and services, ex tools,factories

entrepreneurs

People who decide how to combine resources to create new goods and services.

trade-off

Act of giving up one benefit in order to gain another, great benefit.

guns or butter

Choices that government face when choosing whether to spend money on the military or domestic needs.

Opportunity cost

The most desirable alternative somebody gives up as a a result of a decision.

Thinking at the margin.

Deciding to use one additional unit of some resource

Production possibilities curve

A graph that shows alternative ways to use an economys resources

underutilization

Using fewer resources than an economy is capable of using.

Efficiency

Using resources in such a way as to maximize the output of goods and services.

Utility

The capacity to be useful to someone, the most important reason for buying something.

economy

All the activity in a nation that together affects the production, distribution, and use of goods and services.

Relationship between marginal cost and marginal benefit when deciding to add an additional unit-

If the marginal benefit is greater than the cost it would be a good idea to add a additional unit. But if the cost is higher than the benefit its not a good idea to add another unit.

How might a business or a nation’s use a production possibilities curve

A business or nation can decided how best to use its resources.

What does a country’s production possibilities depend on.

Its technological level and the resources it has available.