Untitled Flashcard Set
1. Scarcity
Scarcity is the condition where human wants are unlimited, but the resources available to satisfy those wants are limited. In simple terms: we want more than we have.
2. Economic Resources
Also known as the Factors of Production, these are the inputs used to create goods and services. There are 4 main types:
Land: Natural resources found in nature (e.g., water, oil, timber).
Labor: Human effort, both physical and mental.
Capital: Tools, machinery, and buildings used to produce other things.
Entrepreneurship: The creativity and risk-taking needed to combine the other 3 resources into a business.
3. Factors of Production
This is another name for Economic Resources. It is easy to remember as the "ingredients" required for any type of production to occur.
4. Opportunity Cost
The value of the next best alternative that is given up when a choice is made. It is not the total of all choices, but specifically the one "best" thing you didn't do.
5. Capital Goods
Goods that are created to help in the production of other goods and services, rather than being bought by consumers (e.g., a pizza oven or a factory robot).
6. Consumer Goods
Goods created for direct use or consumption by individuals for personal satisfaction (e.g., a pizza or a pair of sneakers).
7. Production Possibilities Curve (PPC)
A graph that shows the maximum combinations of 2 different products an economy can produce. It maps out the limits of what is possible with current resources.
8. Constant Opportunity Cost
A situation where the cost of switching between 2 goods remains the same. This happens when resources are easily interchangeable (e.g., giving up 1 unit of wheat for 1 unit of corn every time), resulting in a straight-line PPC.
9. Increasing Opportunity Cost
The principle that as you produce more of one good, you must give up increasingly larger amounts of the other good. This happens because resources are specialized and not perfectly adaptable, resulting in a "bowed-out" (curved) PPC.