Scarcity
condition where society doesn't have enough resources to produce what we want. (lack of)
Scarcity affects
everything we do...what to produce...how to produce it and for whom to produce it
Need
requirements for survival
wants
expression of a need
economics
the study of how people try to satisfy what appears unlimited
who pays for the things we get to have for free?
nothing's "free" everything has a cost
what should be produced?
housing, food, clothing, etc
for whom should it be produced?
workers, professional people, or gov. employees
what are the factors of production?
land, capital, labor, and entrepreneurs
entrepreneur
a risk taker lacking for profit who does something new with existing resources
production
the process of creating goods and services, can take place
land
gifts of nature; these things are "fixed" (limited)
capital goods
tools, equipment, machinery, factories used for goods and services
financial capital
money used to buy the capital goods..tools and equipment used in production
labor
the people working to run the machinery to make the goods
all factors of production present.....
production
GDP
Gross Domestic Product...the $ value of all good and services produced in a country
4 elements to economics
description, analysis, explanation, and prediction
description
important so you know value of goods
analysis
focus on economic activity & why things work and how they happen
explanation
very important to understand & explain how economy works in order to address the problems
prediction
helps us make better decisions by considering future consequences of decisions
economic product
goods & services that are useful, relatively scarce & transferable to others
good
item that is economically useful or satisfies an economic want..It's intended for final use by individuals
capital goods
manufactured & used to produce other goods and service
service
works performed for someone and include entertainment and other acts of service
durable goods
@ least 3+ years when on a regular basis
consumer
uses goods and services to satisfy needs and wants
value
worth that can be expressed in dollars and cents
paradox of value
situation where some necessities (water) have some non-necessities, such as diamonds, has a higher value
utility
the capacity to be useful and provide satisfaction
wealth
comprised of natural resources, factories, stores, stuff, etc.
what determines whether or not something is valuable?
it must be useful
market
location or other mechanism that allows buyers to exchange a certain economic product
markets can be
local, regional, and national
factor market
productive resources are bought and sold
product market
producers sell their goods and services to consumers
economic growth
the nation's total output of goods and services increases over time
productivity
the measure of the amount of output produced by a given amount of inputs in a specific time
what can improve productivity?
more production using some inputs and time
human capital
skills + abilities + health + motivation of people
why is the American economy interdependent?
b/c we rely on others, vice versa to provide goods and services we use
trade off
alternative choices
opportunity cost
next best alternative
PPF (production possibilities frontier)
represents various combinations of goods/services an economy can produce w/all productive resources employed
alpha
produces guns & butter
PPF indicates the maximum combination of....
combinations of goods and services
why is it impossible for alpha to reach its potential?
because resources are not fully employed
economic growth
possible by having more resources or increased productivity causes the production possibilities to move forward
economists
study how people satisfy seemingly unlimited & competing wants w/careful uses of scarce resources and strategies that will help us make the best sections.
what is one of the most important strategies of economists today?
the economic model
economic model
simplified theory or picture what something is or how it works
simple model
can be constructed that reduce complex situations to their most basic elements
what are models based on?
assumptions or things we take for granted as true....they can be revised
cost benefit analysis
way of thinking about a problem that compares the costs of an action to the benefit received
free enterprise
one in which consumers & privately owned businesses rather than the gov. make the majority of the what, how, and for whom decisions.
study of economics
provides a working knowledge of property rights,competition, supply, and demand, the price system, & the economic incentives that make the American economy function
standard of living
the quality of life based on the possession of the necessities and luxuries that make life easier