Test 1 Chapter 1 And 2 Flashcards
Scarcity
Demand for a good/service is greater than the availability of the good/service, so scarcity can limit the choices available to the consumers
Good
Product that can be physically acquired or owned
Service
Action performed which cannot be physically acquired
Production
Conversion of resources into goods and services through the production process
Production process
Inputs of resources and factors of production to the production to the output of products and goods and services
Factors of production
- Natural Resources (NR)
- Labor (L)
- Capital (K)
- Productivity (P)
Natural Resources (NR)
- all non-human made resources like
wood, metal, oil, sun, water, flaura, and fauna
Labor (L)
Work necessary to create a product (quantity of work)
Capital (K)
- all human made ressources such as electricity, machinery, buildings, office supplies, factories
-used in the production process
Productivity (Prod.) + modifies the other three
- anything that modifies NR, L, OR K, which can make those units produce more or less than otherwise.
Examples of production
Human capital, technology, entrepreneurship
Human Capital
Education, skills, training, and experience required which allow workers to produce more quantity/quality
Technology
Anything that modifies the ability of capital (K) to produce.
Entrepreneurship
The ability of some labor to take chances when starting new businesses or coming up with fresh ideas for businesses
Income
The reward of engaging in production either by being a producer or by providing resources
Profit
Income earned by selling goods/services (wages + salaries)
Rent
Income earned by capital owners in exchange for allowing others to use it
Interest
Income earned by owners of money in exchange for letting others use it temporarily
Economics
The study of Gulag involves looking at how people, groups, and societies decide to use their resources when they don’t have enough to meet all their needs (scarcity)
Three Basic Economic Questions
1- What will society produce?
2- How will these products be produced?
3- For whom will these products be produced?
Microeconomics
- narrow view, small, looks at market for specific individual good/services or industries, example: market for baseboard heaters in Canada
Macroeconomics
Broad view, large, looks at economy overall and general factors which affect all markets and industries without specifically analyzing individual ones. Example: unemployment, inflation, relations with foreign countries
Rationality assumption
making the best decisions, considering the consequences of our actions
Opportunity Cost (OC)
Choosing the rational choice when presented with two or more options
- value of indirect costs of the chosen option + indirect costs of the chosen option
