Econ 1.1-1.3

Trade-off

  • When you give something up to get something else

Scarcity

  • There is not enough of a resource available to satisfy all of the various ways a society wants to use it

factors of production:

  • land, labor, capital, entrepreneurship

Land

  • all resources that come directly from nature

Labor

  • the effort of workers

Capital

  • manufactured goods used to make other goods and services

Entrepreneurship

  • manufactured goods used to make other goods and services

opportunity cost

  • The value of the next best alternative that you must give up in order to get the item

ceteris paribus

  • All other relevant factors remain unchanged

production possibilities curve

  • A model that helps economists think about the trade offs necessary in every economy

Efficient

  • An economy is efficient if there is no way to make anyone better off without making at least one person worse off

economic growth

  • An increase in the maximum amount of goods and services and economy can produce

Trade

  • People provide goods and services to others and receive goods and services in return

Specialization

  • Each person specializes in the task that they are good at performing

comparative advantage

  • Someone has a comparative advantage in producing a good or service if their opportunity cost is the lowest among the people who could produce that good or service

absolute advantage

  • Someone has an absolute advantage in producing a good or service if they can make more of it with a given amount of time and resources