1.1
What is scarcity?
There are not enough resources to satisfy human wants (unlimited)
What is a trade-off?
Choosing one option over another
What does a PPC represent?
Efficiency point - Maximum production combination of two goods/services
What idea did Adam Smith create?
Free Market Economy
What is the difference between needs and wants?
Wants - desires that are not necessary for survival
What is utility?
What does a point inside the PPC represent?
Underutilization
Macro or Micro: The US government imposing tariffs on other countries.
Macro
How can a need also be a want?
You need food, but you could want Chick-fil-A.
Incentives are benefits that encourage you to choose one thing over another. Ex: Gyms at the beginning of the year (deals)
What does a point outside the PPC represent?
Impossible production
Macro or Micro: Starbucks rising the price of lattes and seeing how people respond.
Micro
What is cost-benefit analysis?
Creating and comparing a list of costs and benefits to make the best decision
What is marginal cost? Marginal benefit?
The cost/benefit of producing one more product/service.
What would cause a PPC to move outward?
Increase in resources
Positive or Normative: The government should provide housing for everyone.
Normative
What are the factors of production? What is an example of each?
Land - metal used to make machines
Labor - construction workers
Entrepreneurship - coming up with the idea for the business
Capital - money put into the business
WKU because it is the next best option/what you are not choosing
What assumptions are made for PPCs?
1. Resources are fixed
2. All resources are fully employed
3. Technology is fixed
4. Only two things can be produced
Positive or Normative: 2.7% of Americans receive subsidized housing.
Positive