Scarcity
a condition facing all societies because there are not enough productive resources to satisfy people's unlimited wants
Productive Resources
the inputs used to produce the goods and services that people want
economics
the study of how people use their scarce resources to satisfy their unlimited wants
prodcutive resources are also known as
factors of prodcution
Factors of production are the
inputs used to produce the goods and services that poeple want
Human Resources is the ___ of productive resources
first category
Human resources
the broad category of human efforts both physical and mental, used to produce goods and services
Labor is the most important of the
human resources
Labor
the physical and mental effort used to produce goods and services
Labor comes from a more fundamental human resource
time
Entrepreneur
ties to earn a profit by developing a new product or finding a better way to produce an existing one
Profit equals the
revenue from sales minus the cost of production
entrepreneur suffers a loss when
production costs exceeds revenue
Natural resources
gifts of nature
Natural resources include
land, forests, minderals, oil reserves, bodies of water and animals
Natural resources can be divided into
renewable resources and exhaustible resources
Renewable resource can be
used indefinitely
Timber is a
renewable resource
Exhaustive resource
does not renew itself it is available for a limited amount of time
Capital goods
all human creations used to produce goods and services
Capital goods include
factories, trucks, machines, tools and other manufactured items employed to produce goods and services
Goods
tangible it requires scarce resources to produce and satifies human wants
Service
intangible - not physical
Goods that are truly free are not the subject matter of economics. Without scarcity ther ewould be no need for prices and no economic problem - True of False
True
Economic Theory
a simplification of economic reality used to make perdictions about the real world
Economic theory is also called an
economic model
Other-things-constant assumption
to identify the variables of interest and then focus exclusively on the relations among them
Behavioral assumptions
assumptions on what motivates people
Rational
try to make the best choices you can given the information available
Rational self-interest does not necesarily mean selfishness or greed - True of False
true
The assumption of rational self-interest does not rule out concern for others. It simply means that concern for otheris is influenced by some extent by the same economic forces that affect other economic choices - T or F
T
Rationality implies that
consumers buy products that are expected to maximize their level of satisfaction
Positive statements
concern what is
Normative statements concern what
in someone's opinion what should be
Normative statements or personal opinions are relevant in
debates about public policy as long as opinions are distinguished from facts
marginal
incremental, additional, extra or one more it refers to a change in economic variable, a change in the status quo
A rational decision maker will change the status quo as long as the expected marginal benefit from the change exceeds the expected marginal cost - T F
T
Market Economics
study of economic behavior in particular markets, such as the market for computers or for unskilled labor
National economics
Study of the economic behavior of the economy as a whole, especially the national economy
Market
the means by which buyers and sellers carry out exchange
Goods and services are
bought and sold in product markets
Resources are bought and sold in
resource markets
the most important resource market is the
labor market
Four types of decision makers in the economy
households, firms, governments and resot of world
Households
play leading role in economy - demand the goods and services produced
Firms, government and rest of the world demand the
resources that households supply then use them to supply the goods and services the households demand
Circular flow model
describes the flow of resources, products, income and revenue among economic desision makers
Households supply
human resources, natural resources and capital resources to firms
Households demand
goods and services from firms through product markets
The flows of resources and products are supported by the flows of
income and expenditure - the flow of money