Basic Economics: Chapter 1

Scarcity

Economic condition that results from society not having enough resources to produce all the things people would like to have.

Causes of scarcity

The lack of resources and unlimited wants

Economics

Study of how people try to satisfy seemingly unlimited and competing wants through the careful use of relatively scarce resources.

Need

A basic requirement

Want

Not a necessity

TINSTAFL

The up-price of something to cover the cost of give away promo.

Factors of Production

Land, Capital, Labor, Entrepreneurs

Gross Domestic Product (GDP)

Dollar value of all final goods, services, and structures produced within a country’s borders in 12 month period.

Economy Describes:

Jobs, prices, trade, taxes, and government spending.

Types of Goods:

Consumer Goods

Durable Goods

Nondurable Goods

Services

Work performed for someone

Consumers

People who use goods and services

Value

The worth expressed in money

Paradox of Value

Increased wants= increased price

Utility

Capacity to be useful and provide satisfaction

Market

Mechanism allowing buyers and sellers to exchange product

Types of Markets

Factor and Product Markets

Factor markets

Bought and sold

Product Markets

Sell goods and services

Economic Growth

Nation’s total output of goods and services increased

Productivity

Measure of goods and services done in a certain amount of time

Human capital

Sum of people’s abilities

Government’s investments

Training

Education

Healthcare

Business Investments

Training

Increase skill programs

Division of labor

Way of organizing work so each worker completes separate tasks.

Specializing

Tasks performed with the backing of greater skill or education.

Economic independence

The reliance on others to provide goods and services to consume

Trade offs

The alternate choice to a decision made

Opportunity Cost

Cost of the next best alternative ( another object you must give up in order to purchase something else)

Production

Possibilities

Frontier

Diagram representing the combination of goods and services an economy can produce when all resources are in use.

Economic Model

Simplified equation, graph, or figure that demonstrates how something works. It is simplified to the most basic unit.

Cost-benefit analysis

Comparing the cost of an action to the benefits received

Free enterprise economy

Private owned business make decisions, rather than the government

Standards of living

Quality of life based of the ownership of the necessities and luxuries that make life easier.

Economics …

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