Basic Economic Concpets Unit 1 Flashcards
Opportunity cost
The value** of the highest - valued option forgone
Full cost
Monetary cost + non - monetary cost
Economic goods
- More of it is preferred ( since the quantity available is insufficient to satisfy all human wants for it )
- Their is opportunity cost in producing the good
Free good
- More of it is not preferred
- Quantity available is sufficient to satisfy all human wants for it
Production
An activity which resources ( input ) are transformed into goods and services ( output )
Consumption
An activity through which human wants are satisfied
Money flow in product market ( for household and firm )
Household: household expenditures
Firm: revenue
Money flow in factor market ( household and firm )
Household: factor income ( eg. wages and rent )
Firm: production cost
Interest
For borrower: the cost of early availability of goods/ services
For lender: compensation for deferring consumption of goods/ use of resources
What to produce
The choice of types and quantities of goods and services to produce
How to produce
The choice of production methods
For whom to produce
The choice of about criteria of who can enjoy the goods and services
Full private property rights
- Exclusive right to use the good
- Exclusive right to receive income generated by the use of the good
- Right to transfer the good
Price competition
Allocation of resources or distribution of goods according to the willingness of ability to pay the market price
Non - price competition
All forms of competition that does not use the price mechanism
