Economics Review

Economics Review

Economics- the study how people seek to meet their unlimited wants and need by making choice among scarce resources.

Scarcity – Inability of limited resources satisfy our unlimited wants and needs.

Factors of Production- (resources) Used to make all goods and services. Land, Labor, Human Capital, Physical Capital

Land- (Logs) all natural resources used to produce goods and services

Labor-(hammer hitting logs) the effort people devote to tasks for which they are paid

Human Capital- (brain, person) The knowledge and skills a worker gains through education and experience.

Physical Capital- (hammer) The knowledge and skills a worker gains through education and experience.

Goods- the physical objects that someone produces

Services- the actions or activities that one person performs to another

Needs- Necessary to survive. Something Essential for survival

Wants- Something that people desire but that is not necessary for survival

Shortage- is temporary lack of good or services based on decision of producers. A situation in which consumers want more of a good or service than producers are willing to make available at a particular price.

Entrepreneur- a person who decides how to combine resources to create goods and services.

Trade-off- giving up one benefit for another greater one

Opportunity cost- 2nd best alternative/opportunity, the most desirable alternative given up as the result of decision.

PPC- (Production Possibilities Curve) a graph that shows alternative ways to use an economy’s productive resources.

PPF- (Production Possibilities Frontier) a line on production possibilities curve that shows the maximum possible output an economy can produce.

Thinking at the margin- the process of deciding whether to do or use one additional unit of some resource

Efficiency- the use of resources in such a way as to maximize the output of goods and services

Underutilization- the use of fewer resources than an economy is capable of using

Cost/benefit analysis- a decision making process in which you compare what you will sacrifice and gain by a specific action

Economic System- structure of principle and methods how society uses its resources and produces and distributes goods and services

Factor payment- income, the income people receive in return for supplying factors of production

Profit- the amount of money

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