General Terms and Definitions Flashcards
Define Economics
Economics is the study of solving the problem of how to allocate SCARCE RESOURCES that have alternative uses so as to maximize SATISFACTION of consumers NEEDS and WANTS.
What conditions are needed for Economics?
Scarcity/limited resources
and
unlimited wants.
What economics decisions are needed:
WHAT to produce
WHAT resources are to be used
HOW resources are produced
WHO is going to get the goods
What are Needs?
Things individuals must have satisfied in order to sustain life.
What happens if your needs are not met?
Long term- you will die.
What are Wants?
Desires individuals would like to have satisfied but are not necessary to sustain life. Wants are unlimited.
What is limited means/scarcity?
The condition of limited resources relative to wants.
What is choice?
A decision between alternatives.
What is Opportunity cost?
The next best alternative FOREGONE when a decision is made. (The second best alternative)
What are our needs?
Food, Water, Shelter, Clothing.
What are luxury goods?
They are goods we want to have to make life better bu not essential for our needs.
What are basic goods?
They are goods that are essential for our needs.
What are our limited means?
Time, Money, Skills/Knowledge, Family
Why do we have limited resources?
Because we have limited means.
What are the two differences between wants and needs?
Needs= Must have, Limited Wants= Don't need to have, unlimited
