1.1: Introduction to Economics: Scarcity (copy)

Economics

The science of scarcity and the study of choices made by individuals, firms, and governments.

Scarcity

The idea that we have unlimited wants but limited resources, necessitating choices.

Microeconomics

The study of small economic units such as individuals, firms, and markets.

Macroeconomics

The study of the economy as a whole or economic aggregates.

Theoretical Economics

The use of the scientific method to develop generalizations and theories.

Policy Economics

The application of economic theories to address problems or meet goals.

Positive Statement

A statement based on facts, avoiding value judgments (what is).

Normative Statement

A statement that includes value judgments (what should be).

Trade-off

The concept that choices must be made due to scarcity, and every choice has a cost.

Utility

The satisfaction derived from consuming goods and services.

Marginal

Referring to the additional benefit or cost associated with a choice.

Allocate

To distribute resources among various uses.

Price

The amount a buyer pays to purchase a good.

Cost

The amount a seller pays to produce a good.

Investment

Money spent by businesses to improve production capabilities.

Consumer Good

A product created for direct consumption, such as pizza.

Capital Good

A product created for indirect consumption, used to make consumer goods.

Factors of Production

The resources classified as land, labor, capital, and entrepreneurship.

Land

All natural resources used to produce goods and services, such as water and sunlight.

Labor

Any effort a person devotes to a task for which they are paid.

Physical Capital

Human-made resources used to create other goods and services, like tools and machinery.

Human Capital

Skills or knowledge gained by a worker through education and experience.

Entrepreneurship

The initiative and innovation of leaders who combine factors of production to create goods and services.

Profit

The difference between revenue and costs (Profit = Revenue - Costs).

Productivity

A measure of efficiency showing the number of outputs per unit of input.