Introduction to Economics and Scarcity Concepts

Economics

The science of how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants.

Good

anything that gives you utility

Bad

something that gives disulisity

Resource

This is needed to produce goods, sometimes referred to as inputs or factors of production.

Land

a type of resource that is considered or found natural

Labor

the physical and mental effort/talents by people

Capital

goods that can be used as further input and the account used to summarize the owner's equity in a business

Entreprenuership

The process of creating a new business. An entrepreneur takes a risk. The risk involved is that you may fail and go bankrupt. However, if you suceed you may become wealthy quickly.

Scarcity

Condition in which our wants (for goods) are greater than the limited resources available to satisfy those wants.

- The Need to make choices
- the need for a rarioning device
- competition

what are the effects of scarcity

Opportunity Cost

The most highly valued opportunity or alternative forfeited when we make a choice.

Marginal Benefits

Additional benefits; the benefits connected with consuming an additional unit of a good or undertaking one more unit of an activity.

Marginal Costs

Additional costs; the costs connected with consuming an additional unit of a good or undertaking one more unit of an activity.

Efficiency

The condition when marginal benefits equal marginal costs.

Incentive

Something that encourages or motivates a person to undertake an action.

Exchange

The giving up of one thing for something else.

Positive Economics

Attempts to determine what is; deals with cause-effect relationships that can be tested.

Normative Economics

Addresses what should be; deals with value judgments and opinions that cannot be tested.

Microeconomics

The branch of economics that deals with human behavior and choices as they relate to relatively small units.

Macroeconomics

The branch of economics that deals with human behavior and choices as they relate to the entire economy.

Ceteris Paribus

A Latin term meaning 'all other things constant' or 'nothing else changes'.

Competition

Exists because of scarcity; people compete for limited available resources.

Rationing Device

A means of deciding who gets what of available resources and goods.

Benefits

The advantages or positive outcomes associated with a decision.

Costs

The negative outcomes or sacrifices associated with a decision.

Economic Categories

Divided into positive economics, normative economics, microeconomics, and macroeconomics.

Behavior

The actions individuals take based on their choices and the opportunity costs involved.

Fatalities Equation

Total number of fatalities = Number of accidents x Rate of fatalities per accident.

Economic Incentives

Motivations for individuals to undertake actions based on perceived benefits outweighing costs.

Choice

The act of selecting among alternatives due to scarcity.

Marginal Decision Making

Making decisions based on comparing marginal benefits to marginal costs.