Unit 1.1: Intro to Economics

Ecnomics

Study of choice and effects

Opportunity Cost

The value of something given up in makking a choice

Trade-offs

The loss of one advantage or benefit in order to gain another

Scarcity

A situation where unlimited wants exist, but the resources available to meet them are limited

Positive statement

Statement of fact

Normative statement

Statement of judgement

Utility

Satisfaction from a product

Utility maximization

seeking the highest level of satisfication

Incentive and disincentive

Encouragement and discouragement

Ceteris paribus

other things being equal

Factors of Production

Land, labour, capital, entrepreneurship

Land

What nature provides to create goods and services

Rent

A fee charged for the use of property or land

Labour

Human resources which go into the production

Wages

Payment in exchange for labour

Capital

Something people create to produce other goods or services

Interest

An additional fee is charged on top of the amount borrowed

Entrepreneurship

The person who assumes the risk of a business venture

Profit

When revenue is higher than expences

Production Possibility Curve

A graph that shows the trade-offs and opportunity costs of choosing different items

Choice

The decisions made between alternatives

Efficiency

The most optimal way to input resources that result in a greater point

Equity

Fairness in distributing things to different groups

Economic well-being

The extent to which the economy provides resources and opportunities.

Sustainability

Ability to continuously grow the economy without interfering with future needs.

Change

Evolution in economy such as trends, needs, and structure.

Interdependence

How different parts of the economy rely and interact on each other.

Intervention

For the state to interfere in markets to accomplish certain goals.

Potential output

The maximum number of products that can be produced

Efficiency in PPC

When the economy is using its resources to the fullest

Reason why the PPC is curved

Resources are not perfectly adoptable from one industry to another. Therefore, giving up more to receive more.

Reason for insufficient use of resources

Recession or unemployment

Productivity

Producing more using the same resources

Quantity or Quality

The way to achieve the potential growth

Actual growth

Moving closer to the curve

Actual output

A point INSIDE the curve

Potential output

Any point ON the curve

Potential growth

Outward shift of the curve

Representation of CURVE

The resources that can be used efficiently