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Basic DefinitionBasic Definition•Study of how people try to fulfill their wants through the use of scarce resources.
Fundamental ProblemFundamental Problem•Scarcity•Everyone has this problem•Condition that results from society not having enough resources to fulfill everyone’s wants and needs
TINSTAAFLTINSTAAFL•“There Is No Such Thing As A Free Lunch”
•Means nothing is free because we have limited resources.
CapitalCapital•Tools, equipment, machinery, and factories used to make goods and services.
•Can also be money – financial capital
LaborLabor•People with all their efforts, abilities, and skills.
•IOW – People who work or perform a job.
EntrepreneursEntrepreneurs•A risk-taker in search of profits who does something new with existing resources.
•Starts a new business or creates a new product.
ProductionProduction•When all 4 factors of production (land, labor, capital, & entrepreneurship) are present.
•Creates a good or service.
GoodGood•An item that is economically useful or satisfies and economic want.
•Tangible•Ex. iPod, stapler, shoes, car, etc.
ServiceService•Work that is performed for someone.
•Intangible•Ex. Doctors, Lawyers, Teachers, Cashiers, Mechanic, etc.
Paradox of ValueParadox of Value•Situation where some necessities (ex. Water) are cheap and some luxuries (ex. Diamonds) are expensive.
UtilityUtility•The capacity to be useful and provide satisfaction.
•Makes something have true value.
•Utility varies from one person to another.
•What is useful to one person is not useful to someone else.
WealthWealth•Accumulation of products that are tangible, scarce, and transferable from one person to another.
Circular Flow of Economic Circular Flow of Economic ActivityActivity
•Diagram showing how wealth flows through the economy.
2 Types of Markets2 Types of Markets1.Factor Markets
Markets where resources are bought and sold
2.Product MarketsMarkets where producers
sell their goods and services to consumers
ProductivityProductivity•Measure of how much output is produced from how much input is used.
•One of the things that increases economic growth.
Trade-offsTrade-offs•Alternative choices•Ex: Snickers or Milky Way–Blue Jeans or Khakis–Dinner or a Movie
Opportunity CostOpportunity Cost•Cost of the next best alternative use of money, time, or resources when one choice is made over another.
Production Production Possibilities CurvePossibilities Curve
•A graph representing all the goods and services that can be produced by a country.
Cost-Benefit AnalysisCost-Benefit Analysis•Compares the cost of an action to the benefits received.
•Think about what you’ll get from what you want to do.