Topic 1.1

• Economics: The study of scarcity and choice

• Trade-Off: You make a trade-off when you give up something in order to get something else (what you are gaining is the trade-off)

• Resource of Factor Production: Anything that can be used to produce something else

• Land: All resources that come from nature, such as timber, wind, and petroleum

• Labor: The effort of workers

• Capital: Manufactured goods used to make other goods and services

• Entrepreneurship: The efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes

• Scarcity: When unlimited wants exceed limited resources

• Opportunity Cost: The value of the next best alternative (choice) that you have given up in order to get an item.

• Macroeconomics: Concerned with the overall ups and downs of the economy (large scale)

• Household: A person or group of people that share their income

• Firm: Any organization that produces goods or services for sale

Topic 1.2

• PPC: The Production Possibilities Curve illustrates the necessary trade-offs in a economy that produces only two goods

• Ceteris Paribus: “Other things equal” means that all other relevant factors remain unchanged

• Efficient: There are no missed opportunities - there is no way to make some people better off without making other people worse off

• Economic Growth: An increase in the maximum amount of goods and services an economy can produce

Topic 1.3

• Trade: Providing goods and services to others and receive goods and services in return

• Specialization: When each person focuses on the task that they are good at performing

• Comparative Advantage: Having the lowest opportunity cost among the people or countries that can produce that good or service

• Absolute Advantage: Being able to produce more of a good or service with the given amount of time and resources

• Terms of Trade: The rate at which one good can be exchanged for another and have both parties benefit

Topic 1.4

• Quantity Demanded: The amount of a good or service consumers are willing and able to buy at some specific price. It is shown as a single point in a demand schedule or along a demand curve

• Demand Curve: A graphical representation of the demand schedule. It shows the relationship between quantity demanded and price

• Law of Demand: States that a higher price for a good or service, alt other things being equal, leads to people to a smaller quantity demanded of that good or service

• Change in Demand: A shift of the demand curve, which changes the quantity demanded at any given price

• Movement along the Demand Curve: A change in the

  quantity demanded of a good that is the result of a change in that good's price

• Substitutes: Goods that are meant to be used in place of one another. A rise in the price of one of the goods leads to an increase in demand for the other good.

• Complements: Goods that are bought together to be used together . A rise in the price of one of the goods leads to a decrease in demand for the other good.

• Normal Good: When a rise in consumer income increases the demand for the good and vice versa

• Inferior Good: When a rise in consumer income decreases the demand for the good and vice versa

Topic 1.5

• Quantity Supplied: The actual amount of a good or service people are willing to sell at some specific price

• Supply Curve: The relationship between the quantity supplied and the price

• Law of Supply: states that all other things being equal, the price and quantity supplied of a good are positively or directly related

• Change in Supply: A shift of the supply curve, which indicates a change in the quantity supplied at any given price

• Movement along the Supply Curve: a change in the quantity supplied of a good arising from a change in the good's price

• Input: A good or service that is used in the production of another good or service

• Tax: Treated as an input cost, these are fees producers must pay to the federal government

• Subsidy: Treated as an input cost, these are payments from the government to producers to assist in the production of certain goods or services that are deemed beneficial to society

• Substitutes in Production: Goods that producers can use the same inputs to make either one good or the other

• Complements in Production: Goods are treated as these if increased production of either good creates more of the other good

Topic 1.6

• Equilibrium: The point where QS = QD. This is the intersection point between the supply and demand curves

• Surplus: Also known as excess supply and caused by a price floor, this exists at a price above equilibrium where QS > QD

• Shortage: Also known as excess demand and caused by a price ceiling, this exists at a price below equilibrium where QD > QS