Basic Economic Concepts Summary

What is Economics?

The study of how to allocate scarce resources to satisfy unlimited wants.

What is Scarcity?

A condition where resources are insufficient to satisfy all desires; necessitates choice.

What is Microeconomics?

The study of small economic units (individuals, firms, industries).

What is Macroeconomics?

The study of the overall economy (national growth, inflation, unemployment).

What is a Positive Statement?

A fact-based statement, devoid of value judgments, that describes reality.

What is a Normative Statement?

A subjective statement that includes value judgments and prescribes what ought to be.

What is Marginal Analysis?

Focuses on comparing additional benefits versus additional costs when making decisions.

What is Opportunity Cost?

The most desirable alternative sacrificed as a result of a decision.

What is Land as a Factor of Production?

Natural resources not created by humans.

What is Capital as a Factor of Production?

Tools, equipment, and factories used in production.

What is Labor as a Factor of Production?

Human effort and abilities.

Who are Entrepreneurs?

Individuals who initiate businesses or bring products to market.

What is a Centrally-Planned Economy?

An economic system where the government controls resources and decisions (communi