Basic economic concepts

Economics

social science that studies the decisions individuals, households, businesses, and societies make when faced w/ scarcity.

Scarcity

Unlimited wants but limited resources

land

natural resources that are used to make goods and services

labor

an individuals talents and efforts that are used to produce goods/services (workers necessary)

Physical Capital

man-made tools and machinery necessary to produce goods/service

Human Capital

the knowledge/training necessary to produce goods/service

Entrepreneurship

Idea for a business and coordinates the production and sale of goods/service (risk taker)

Market Economy

private decisions of consumers, resource suppliers, and firms determine how resources are allocated

Market

arrangement that allows buyers and sellers to exchange goods/service

consumer sovereignty

consumers determine the types of goods/services that will be produced with the nations factors of production (By their choice)

Command economy

Factors of production are owned and controlled by the govt. and they coordinate all economic activity.

mixed economy

market based system, under which the govt. plays on important roles, including regulation of markets, where most economic decisions are made

Opportunity cost

the cost of the next best alternative or what you give up

2 ways to get a point out of a PP curve

Secure more resources and improve technology

Ceteris Paribus

All other things equal or all other things constant

Marginal Analysis

Only allow one variable to change

Utility

the benefiters satisfaction you get with a good/service

Diminishing Returns

Increasing at a decreasing rate