UNIT 1: BASIC ECONOMIC CONCEPTS Flashcards
scarcity
limited amount but unlimited desire of something
TINSAAFL
there is no such thing as a free lunch
- every time you make a decision, you pay in some way
rational behavior
we make an assumption that people are rational when making decisions, a ratio of costs to benefits
marginal cost (MC)
the additional cost incurred when you do/buy/make/use the next thing
marginal benefit (MB)
the additional benefit incurred when you do/buy/make/use the next thing
capital
a thing that is used to do other things
consumer goods
personal consumption with the good
ex: a pen used to write in my diary
capital goods
capital consumption, to produce consumer goods
ex: a pen to write and publish a book for profit
optimal allocation
using our time, energy and resources at the right time to do the right thing, where mb = mc
trade off
exchange of something of value for something else with value
opportunity costs
the loss of the chance to get/buy/do/make the next best thing
factors of production
land, labor (entrepreneur) and capital
production possibilities frontier (ppf)
the edge/limit/extent of what we can make
perfect substitutable
a situation where two goods are viewed as identical
the three economic systems
command, traditional and market
