Unit 1: Introduction to Economics

Factors of production

Resources used to produce goods and services.

Land

Natural resources above and below the earth.

Labour

Physical and mental work performed by people.

Capital

Man-made goods for producing more goods.

Entrepreneurship

Skill to organize production and create businesses.

Scarcity

Limited resources against infinite wants.

Opportunity cost

Value of the next best alternative forgone.

Choice

Decision-making due to resource scarcity.

Efficiency

Optimal use of resources for maximum output.

Equity

Fair distribution of opportunities and resources.

Economic well-being

Quality of life and financial security.

Sustainability

Meeting present needs without compromising future generations.

Economic Goods

Scarce resources with opportunity cost and price.

Free Goods

Unlimited resources with no opportunity cost or price.

Centrally Planned Economic System

Government controls all economic decisions and resources.

Free Market

Consumers and producers make economic decisions freely.

Capital Goods

Man-made outputs aiding production processes.

Consumer Goods

Goods/services consumed by individuals in an economy.

PPC model assumptions

Quality, quantity, and technology of resources are constant.

Households

Source of labour and land in the economy.

Firms

Producers of goods using factors of production.

Leakage

Money exiting the circular flow of income.

Injection

Money entering the circular flow of income.

Circular flow model assumptions

Households own production factors; firms produce goods.