Econ

Needs: necessary for survival

Ex: food, shelter, air, water

Wants: items that we desire but do not need to survive

Ex: clothes, luxury goods, travel

Economics: the study of how people seek to satisfy their needs and wants by making choices

Scarcity: we have limited quantities of resources to meet our unlimited wants.

Goods: physical objects

• Ex: shoes and shirts

Services: actions or activities that one person performs for another

• Ex: haircuts, dental checkups, tutoring

Scarcity ≠ Shortage

Shortage: when producers will not or cannot offer goods or services at the current prices

• Temporary or long term

Factors of Production: resources that are used to make all goods and services

• Land, Labor, and Capital

Land: all natural resources used to produce goods and services

• Fertile land for farming, products in or on land

• Coal, water, forest

Labor: the effort that a persons devotes to task for which a person is paid

• Medical aid provided by a doctor, tightening of a clamp by an assembly line worker, and artist’s creation of a painting

Capital: any human-made resource used to produce other goods and services

• Physical and human

• Physical Capital- human made objects used to create other goods and services. Ex: Buildings and tools. Benefits: Extra time, more knowledge and productivity.

• Human Capital: Knowledge ad skills a worker gains through education and experience.

Entrepreneurs: ambitious leader who decide how to combine land, labor, and capital resources to create new goods and services

• Take risks when developing original ideas, start businesses, create new industries, and fuel economic growth

Scarce resources: limited resources that can’t meet the demand of peoples wants and needs

Trade-offs: all alternatives we give up whenever we choose one course of action over another

• Individuals, businesses, and groups of people make decisions involving trade-off

Opportunity cost: desirable alternative given up as the result of a decision

Decision-making-girds: weighing two alternatives

Production Possibilities Curve: shows alternative ways to use an economy’s productive resources

Production possibilities frontier: the line on a production possible graph that shows the maximum possible output

*Each point on the curve represents a trade-off*

Why are production possibility curves important? to show how efficient an economy is, show whenever an economy has grown or shrunk, and show the opportunity cost of a decision to produce more of one good or service.

Efficiency: using resources to maximize production or output of goods and services.

*Production Possibilities Frontier represents economy operating at full efficiency*

When economies are inefficient, they are operating somewhere inside the frontier, which represents an underutilization of resources

Law of increasing: production switches from one item to another, more and more resources are necessary to increase production of the second item.