Scarcity, Economic Systems, PPC, and Growth - Vocabulary Flashcards

Vocabulary flashcards covering key terms from the notes: scarcity, economic systems, the PPC, efficiency, costs, and growth.

Scarcity

The condition of unlimited wants but limited resources, which forces individuals and societies to make choices.

Economics

The study of scarcity and choice with unlimited wants and limited resources.

Economic choice

The personal decision of selecting one option over another due to scarcity.

Free goods

Goods with no cost and unlimited supply (e.g., sunlight).

Positive statement

A factual statement about how the world is.

Normative statement

An opinionated statement about how the world should be.

Economy

A system that coordinates production and consumption and distributes goods and services to those who want them.

Market Economy

An economy where decisions are decentralized and determined by many firms and individuals.

Command Economy

An economy where industries are publicly owned and a central authority makes production and consumption decisions.

Property rights

Establish ownership and grant individuals the right to trade goods and services.

Resource

Anything that can be used to produce something else; factors of production.

Capital

Anything used to make other goods (physical capital such as tools, equipment, and infrastructure).

Entrepreneurship

The ability to combine resources to create value and the willingness to take risks to innovate.

Land

Natural resources; raw materials used to produce finished goods.

Labor

Human effort or work used in production.

Opportunity Cost

The next best alternative forgone when making a choice.

Implicit costs

Forgone benefits of a transaction that are not paid with cash (e.g., time and effort).

Explicit costs

Cash expenses paid for resources (e.g., wages, utilities).

Microeconomics

The study of individual decision-makers (firms and households) and how they interact.

Macroeconomics

The study of the overall economy, including aggregates like unemployment and inflation.

Production Possibilities Curve (PPC)

A graph showing trade-offs between two goods, illustrating opportunity costs and possible growth or contraction; efficiency points lie on or inside the curve depending on assumptions.

Trade-off

Giving up one thing to gain another due to limited resources.

Productive efficiency

Producing goods at the lowest possible cost along the PPC.

Allocative efficiency

Allocating resources so that the mix of goods produced best satisfies society’s wants.

Increasing Opportunity Costs

When the PPC is concave, producing more of one good requires sacrificing increasingly more of the other good.

Economic Growth

A sustained rise in aggregate output; outward shift of the PPC, driven by technology and/or more resources.