Survey of economics

Scarcity

lack of resources to satisfy all desired uses

of those resources

Economic

Study of how best to allocate scarce resources among competing uses

factors of production (inputs)

Land

• Labor

• Capital

• Entrepreneurship

opportunity cost

most desired goods and services that are foregone in order to obtain something else

Production Possibilities

helps an economy understand WHAT can be produced

Economic growth

an expansion of production possibilities

GDP

gross domestic product

GDP

Total value of final goods and services produced within a nation’s borders in a given time period

Nominal GDP

Total value of goods and services produced within a nation’s borders, measured in current prices

Real GDP

inflation-adjusted value of GDP; output measured in constant prices

Economic growth

increase in output

Investment goods

include the plant, machinery, and equipment that are produced for use by businesses plus business inventories

Productivity

output per unit of input

Consumers

maximize happiness or satisfaction

Businesses

maximize profits

Government

maximize societal well-being

Foreigners

pursue the same goals

Factor markets

any place where factors of production are bought and sold

Product markets

any place where finished goods and

services (products) are bought and sold

Ceteris paribus

assumption that nothing else changes