Lesson 1.1: Introduction to Economics

Flashcards made from a presentation segment created as an introduction to economics.

Economics

A social science concerned with the way society chooses to employ its limited resources which have alternative uses to produce goods and services for present and future consumption

• Not strictly about equity markets or money management as much as it is on individual choices based on costs and benefits

Incentives

Rewards or punishments that influence an entity’s actions and behaviors

Scarcity

The natural condition that constantly exists as a result of society having finite resources to fulfill infinite needs

Need

Something thought to be a necessity or essential item required for life (food, water, shelter)

Want

Something unnecessary but desired by an individual that may bring higher quality of life

Shortage

A temporary and man-made unavailability

Factors of Production

The inputs used in the production of goods or services to make a profit:

• Land (natural resources)

• Labor (human effort)

• Capital (tools, machinery, buildings)

• Entrepreneurship (an entity combining the above)

Land

One of the four factors of production that describes the “free gifts of nature” such as land, coal, water, forests, oil, or air

Labor

One of the four factors of production that describes the effort people devote to a task for which they are paid, including physical and mental talents

Capital

One of the four factors of production that describes human-made resources used in the production of goods and services such as tools, machines, equipment, and factories

Entrepreneur

One of the four factors of production that describes a person who combines the other four factors of production to make a profit, finding new ways to produce or innovate on goods and services

Good

A thing that is produced or manufactured by humans, made with and from limited resources from the factors of production

• Cars

• Video games

• Cheese

• Laptops

Service

An intangible good that cannot be stored for later and are inconsistent and non-repeatable

• Taxi driving

• Software development

• Lawn care

• Plumbing

Opportunity Cost

The value of the benefits of the alternative not chosen in favor of another alternative

• “The ________ is the opportunity lost”

• Going to college for later earning power at the expense of present earning potential

Trade-off

Everything sacrificed in the course of a choice

Guns vs Butter

A model describing the trade-offs of a nation during fiscal planning; a nation may choose to spend more on defense industries than agricultural developments in times of war