economics
how do we allocate limited resources for nearly unlimited wants
scarcity
lack of availability / limited resources
microeconomics
why individual businesses make decisions
macroeconoics
studying overall economy for entire country
opportunity cost
whatever must be given up to obtain some item
explicit costs
money
implicit costs
time, money we could have made
incentives
factors that motivate you to act or exert effort
comparitive advantage
can produce at lower opportunity cost than a competitor can
positive statement
can be tested and validated
normative statement
cannot be tested or validated
production possibilities frontier
a model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently
law of increasing opportunity cost (or relative cost)
the opportunity cost of producing a good rises as a society produces more of it
absolute advantage
the ability of one producer to make more than another producer with the same quantity of resources
circular flow model
A diagram that traces the flow of resources, products, income, and revenue among economic decision makers
double coincidence of wants
the unlikely occurrence that two people each have a good the other wants