Econ BASIS 8 : PreComp

Scarcity

The fundamental economic problem of having unlimited wants but limited resources.

Opportunity Cost

The best NEXT item that you could have gotten instead of the chosen item.

Trade-Offs

All of the other things you could have chosen instead of the selected item.

Factors of Production

The resources used to produce goods and services, including land, capital, labor, and entrepreneurs.

Production Possibilities Curve (PPC)

A graph that illustrates how economies allocate resources and make decisions about trade-offs and opportunity costs.

Economic Growth

Occurs when a nation’s total output of goods and services increases over time.

Traditional Economy

An economic system in which decisions are based on customs and traditions.

Market Economy

An economic system based on supply and demand with little government intervention.

Command Economy

An economic system where the government makes all economic decisions.

Mixed Economy

An economic system that incorporates elements of both market and command economies.

Diminishing Marginal Utility

The decrease in satisfaction or usefulness from having one more unit of the same product.

Law of Demand

When the price goes up, quantity demanded goes down, and vice versa.

Change in Quantity Demanded

Movement along the demand curve due to a change in price.

Change in Demand

A shift of the demand curve due to changes in factors other than price.

Equilibrium

The point where quantity demanded equals quantity supplied.

Shortage

Occurs when buyers want to purchase more units than sellers offer at a given price.

Surplus

Occurs when sellers produce more units than buyers will purchase at a given price.

Price Floor

The lowest legal price that can be paid for a product.

Price Ceiling

The highest legal price that can be charged for a product.

Short-Run Production

A period so short that only variable inputs can be changed.

Long-Run Production

A period long enough to change the amounts of all inputs.

Economies of Scale

Efficiency gains as a firm increases production.

Constant Returns to Scale

When inputs increase by a certain percentage and output increases by the same percentage.

Diseconomies of Scale

When a company’s average cost per unit increases as output increases.

Perfect Competition

A market structure characterized by many producers offering homogeneous goods with free entry and exit.

Total Revenue

The total amount earned by a firm from the sale of its products.

Total Profit

Total Revenue - Total Cost.

Accounting Costs

Direct monetary expenses a business incurs to provide services.

Economic Costs

Non-monetary costs that arise when using an asset or resource.

Marginal Cost

The extra cost of producing one additional unit of output.

Marginal Revenue

The additional revenue generated from selling one more unit of output.