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What do economists believe are the 3 basic needs of life?
shelter, food/water, clothing
Assumption that economists make
people have unlimited wants; all resources are limited/finite
Resource
Anything that people can use to make or obtain what they need or want
Factors of Production
things used to produce goods and services (also known as resources)
Types of resources and their type of payment
Land-rent; labor-wages; capital-interest; entrepreneurship-profit
Capital
things that can help produce other things
physical: manufactured items that people use to make other goods and/or services
human: skills, intellect, and ability of labor (improved w/ training and education)
financial: money
Entrepreneurship
making decisions on what to do with the land, labor, and capital
Scarcity
people do not and cannot have enough income, time, or resources to satisfy their every desire and so we have to make decisions
Economics
study of how people and nations make choices about how to use scarce resources to fill their needs and wants
trade-offs
all the things that had to be given up when a decision was made
opportunity cost
the hardest choice to give up when a decision is made
Opportunity benefit
what is gained by making a particular choice
Efficient
performing/functioning in the best possible manner with no waste of time, effort, and resources
What does the line on a PPF or PPC graph represent
the outermost limits of what could be produced in peak conditions
On a PPF or PPC graph, what does a point/dot represent
the actual production
Explain the three regions of a PPF
point on the PPF=most efficient
point inside the PPF=inefficient
point outside the PPF=not possible
3 causes for economic growth
increase in the quantity of resources, increase in quality of resources, technological advancements
Difference between straight line PPFs and Curved PPFs
straight=constant opportunity cost; curved=increasing opportunity cost
absolute advantage
advantage realized by the producer able to generate greater output with a given amount of time or resources
Comparative advantage
When one individual or nation can produce something at a lower opportunity cost than another; what product can you produce best in regards to opportunity cost
Output Problem
The numbers that are varying represent what can be produced in a given period of time
Input Problem
The numbers that are varying represent how much goes IN to produce an equal number of output; you want the lower numbers
Terms of trade
an agreed upon exchange rate of two goods between two producers (often nations)
Mutually beneficial terms of trade
fall between the opportunity costs of the two producers involved
