IB Intro to Economics

What is economic?

Economic refers to the study of how individuals and societies allocate scarce resources to satisfy unlimited wants and needs.

Microeconomics

examines indiviual decision-making in an economy

Needs and wants are satisfied by

goods and services

Scarcity

a situation in which available resources are finite while wants are infinite

Opportunity cost

the next best alternative forgone when an economic decision is made

Free good

a good that is not scare, therefore it has zero opportunity cost

Economic good

any good that is scare and therefore has an opportunity cost greater than zero

4 factors of production

Land, Labor, Capital, Entrepreneurship

What are the basic economic question

1. What should be produced and how much?

2. How should it be produced

3. For whom should it be produced

Resource Allocation

assigning available resources to specific uses among many possible alternatives

Redistribution of income

happens when there is a change in the distribution of income among different individuals or groups

Production Possibilities Curve

represents the maximum amounts of two goods that can be produced by an economy in a given time period, if all the resources are being used efficiently and the sate of technology is fixed

Why is the shape of PPC is curved?

Due to the law of increasing opportunity costs, which states that as production of one good increases, the opportunity cost of producing an additional unit of that good also increases.

economic growth

refers to increases in the quantity of output produced in an economy over a period of time

Positive economics

tires to describe, explain, and predict economic events based on hypotheses, theories, and models

Normative economics

deals with how things in the economy should or ought to be based on value judgements about what should happen, what is good or bad, and what is right or wrong