Economics: Scarcity, Opportunity Cost, PPC, Comparative Advantage, Demand & Supply

What is scarcity?

Scarcity refers to limited resources that are desirable, making them scarce.

How does scarcity differ from shortage?

Scarcity is permanent, while shortage is temporary.

What is opportunity cost?

Opportunity cost is the benefit you miss when choosing one option over another.

What are the three types of economic resources?

Human Capital, Physical Capital, and Financial Capital.

What is Human Capital?

Human Capital refers to the skills and knowledge a worker brings to a job.

What is Physical Capital?

Physical Capital includes machines and other assets used to produce goods and services.

What is Financial Capital?

Financial Capital is money used to fund improvements to Physical and Human Capital, often borrowed at interest.

What is the role of entrepreneurship in economics?

Entrepreneurship involves individuals or groups directing the use of economic resources, with profit as payment.

What is the payment for land in economics?

The payment for land is rent.

What is the payment for labor?

The payment for labor is wages, which are the largest cost for most businesses.

What does 'marginal' refer to in economics?

Marginal refers to small changes or the edge of a decision.

What is Marginal Cost?

Marginal Cost is the cost of adding one more unit of a good or service.

What is Marginal Benefit?

Marginal Benefit is the benefit received from adding one more unit of a good or service.

What does a Production Possibilities Curve (PPC) illustrate?

A PPC shows the trade-off between two alternatives in production.

What does it mean if a point is on the PPC?

A point on the PPC indicates efficient production of goods.

What does it mean if a point is behind the PPC?

A point behind the PPC indicates inefficient production.

What is absolute advantage?

Absolute advantage is when an entity can produce more of a good than another entity with the same resources.

What is comparative advantage?

Comparative advantage is the ability to produce a good at a lower opportunity cost than another entity.

What are terms of trade in economics?

Terms of trade refer to the economic theory that nations can improve their consumption beyond their PPC.

What is the Law of Demand?

The Law of Demand states that quantity demanded varies inversely with price.

What is the income effect?

The income effect occurs when a price change affects consumer purchasing power, leading to changes in quantity demanded.

What is the substitution effect?

The substitution effect occurs when consumers switch to a substitute product when the price of another product changes.

What are the determinants of demand?

Determinants of demand include taste, income, related goods, number of buyers, and expectations.

What is elastic demand?

Elastic demand is when a small price change leads to a large change in quantity demanded.

What is inelastic demand?

Inelastic demand is when a price change leads to a relatively small change in quantity demanded.