chapter one : fundamentals of economics Flashcards
needs are…
- neccessities for you to live a healthy and safe life
- housing, transportation, food, etc.
wants are…
- comforts and upgrades you can live without
- travel, entertainment, luxury clothing/jewlery, eating out
goods are…
items you buy, such as food, clothing, toys, etc.
services are…
jobs people do for other people such as haircuts, teaching, etc.
scarcity
- implies limited quantities of resources to meet unlimited wants
- it always exists bc our needs and wants are always greater than our resource supply
shortage
occurs when producers will not or can not offer goods or services at their current prices
factors of production
- the resources used to create goods and services; land, labor, capital, entrepreneurship
land
natural resources/ where goods or service will be produced
labor
who puts in the effort of making the goods or service
capital
the tools used to make the goods or services
entrepreneurship
combine the factors to make a profit
physical capital
tangible assets or non-human resources, such as equipment and property
human capital
intangible assets or human resources, such as human. expertise, experience, knowledge, and. capabilities
entrepreneurs
an individual who createsa new business, bearing most of the risk and enjoying most of the rewards
benefits of using capital - list
- extra time
- more knowledge
- increased productivity
trade-offs
- refers to a situation in which gaining one benefit requires sacrificing another
- arise in decision-making
“guns or butter”
the decision of a govt. to produce military goods or consumer goods
opportunity cost
the cost of giving up one opportunity in order to take another one (the ‘next best alternative’)
- ex. go to out of state college or stay close to home
decision making grid
ex: sleep late or wake up early to study
- benefits, benefits foregone, opportunity cost
thinking at the margin
- to think about your next step forward
- in addition to looking at opportunity costs, economic also look at the cost and benefits or adding or subtracting one more unit
- it means additional
- as long as the marginal benefit is greater than the marginal cost, it pays to add one more unit
cost/benefit analysis
a systematic process for identifying, quantifying, and comparing expected benefits and costs of an investment, action, or policy
- 2 main applications;
1. determining the soundness of a decision
2. providing a basis for comparing alternative decisions
production possibilities
- production possibility curve
- inside the curve: under utilization or resources
- outside the curve: not attainable w/ available resources
- on the curve: full utilization
- shape of a PPC: downward sloping curve
efficiency
when all goods and factors of production in an economy are distributed or allocated to their most valuable uses and waste is eliminated or minimized
growth
getting the most out of your resources
