Economic Basics: Scarcity, Efficiency, and Economic Activities

Vocabulary flashcards covering scarcity, shortages, opportunity cost, utility, rational behavior, marginal analysis, marginal, PPF, increasing costs, allocation, efficiency, production and allocative efficiency, division of labor, and the four types of economic activities.

Scarcity

the condition where wants and needs are not satisfied because of limited resources.

Shortage

a temporary condition where the demand on a certain commodity or service cannot be met by the current supply.

Decision-making during scarcity

the process of choosing how to allocate limited resources when resources are scarce.

Rational behavior

the idea that the same person may make different choices under different circumstances.

Marginal analysis

the examination of incremental costs and benefits when making decisions.

Opportunity cost

the cost we forgo to getting something else.

Utility (economics)

an individual's pleasure, happiness, or satisfaction from consuming goods or services.

Marginal

additional, change in, or an incremental addition; the value of one more unit.

Production Possibilities Frontier (PPF)

a fundamental concept showing the trade-offs and opportunity costs in allocating scarce resources between different goods or services.

Principle of increasing costs

as the production of a good expands, the opportunity cost of producing another unit generally increases.

Allocation of scarce resources

society's decisions on how to divide scarce input resources among different outputs and among producers.

Efficiency

a state where there is no waste—resources are not left unused or misallocated.

Productive Efficiency

producing the maximum possible output with the given inputs and technology.

Allocative Efficiency

when the goods and services produced match people’s preferences and are distributed to those who value them most.

Division of labor

breaking up a task into smaller, more specialized tasks so that each worker can become more adept at a particular job.

Primary Activities

Using natural resources.

Secondary Activities

Manufacturing and construction.

Tertiary Activities

Providing services.

Quaternary Activities

Knowledge-based services.