Economics Unit 1
Resource: Anything used to produce a good or service.
Resources are always limited or scarce.
Economics - The study of how people choose to use scarce resources to satisfy their unlimited wants.
Scarcity: Our wants are greater than the resources available to satisfy them.
Scarcity forces you to choose. These choices are called tradeoffs.
Trade off: Whenever you choose one thing over another you have made a tradeoff. \n Opportunity Costs: The value of the next best alternative that is given up.
Marginal Cost -. What you have to give up to gain one more unit of an activity or something.
Marginal Benefit -what you gain by adding one more unit of an activity or something.
Includes: Money, time, entertainment, experience, fun, etc…
Marginal Analysis - Tool used to compare the weight of marginal costs and marginal benefits.
Incentive: Something that motivates a person to make a decision.
Positive Incentives: Good grades, awards, money, social standing/friendship, food, dating, etc. \n Negative Incentives: Failing grades, fines, jail time, punishment, embarrassment, social consequences.
Rational Decision Making: A decision made after weighing both the costs and benefits.
Utility - Usefulness, satisfaction, or enjoyment gained from a good or service.
We can measure utility using an economic term: utils.
Marginal Cost - what you have to give up to gain one or more unit of an activity or something.
Marginal Benefit -what you gain by adding one more unit of an activity or something.
Can be measured in utils.
Law of Diminishing Marginal Utility: After adding one more unit of something, the marginal benefit (pleasure) of adding another will always be less than the first.
- Factors of Production: the resources or inputs used to produce goods and services.
Land, entrepreneurship, labor, and capital.
Outputs: The goods and services produced by the resources.
- Perpetual Resources: Solar and wind energy.
- Renewable Resources: Forests, fish, and animals.
Nonrenewable Resources: Fossil fuels: oil, coal, natural gas.
- Human Capital: The knowledge and skills people possess from education, on the job training (OJT), and other experiences.
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- Degrees, certificates, work experience, problem solving skills, physical abilities, tech skills, creativity, reading level, language skills, relationships, teamwork etc…
- Physical Capital: Human made tools, machines, equipment, and buildings a business needs to be productive.
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- Raw materials, tools, vehicles, technology, software, etc..
- Labor: The time and mental & physical effort that people devote to producing goods and services in exchange for being paid.
Specialization: The development of skills or knowledge in one part of a job or a field of interest.
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