Scarcity & Choice
The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources
What is scarcity?
A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
What is the Production Possibilities Curve?
The inverse relationship between the price of a good and the quantity consumers are willing and able to buy
What is the Law of Demand?
The total market value of all final goods and services produced within a country's borders in a given year
What is Gross Domestic Product?
The percentage of the labor force that is jobless and actively looking for work
What is the unemployment rate?
The value of the next best alternative forgone when making a decision
What is opportunity cost?
Any point located inside the production possibilities curve represents this economic condition
What is inefficiency?
Two goods for which an increase in the price of one leads to an increase in the demand for the other
What are substitute goods?
This approach calculates GDP by adding up consumption, investment, government spending, and net exports
What is the expenditure approach?
Unemployment caused by the normal search time required by workers with marketable skills who are changing jobs
What is frictional unemployment?
Goods that are used to produce other goods and services, rather than being consumed for their own sake
What are capital goods?
This shape of a production possibilities curve indicates increasing opportunity costs
What is bowed out?
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Goods used in the production of final goods, which are excluded from GDP to avoid double counting
What are intermediate goods?
Unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs
What is structural unemployment?
The four categories of economic resources: land, labor, capital, and entrepreneurship
What are the factors of production?
An outward shift of the entire production possibilities curve illustrates this concept
What is economic growth?
A legal maximum on the price at which a good can be sold, often creating a shortage if binding
What is a price ceiling?
This component of GDP includes spending on new capital machinery, construction, and changes in inventory
What is gross private domestic investment?
Individuals who have stopped looking for work because they believe no jobs are available for them, and are thus not counted in the labor force
What are discouraged workers?
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
What is macroeconomics?
A straight-line production possibilities curve indicates this type of opportunity cost
What is constant opportunity cost?
A measure of how much the quantity demanded of a good responds to a change in its price
What is price elasticity of demand?
A social security check or unemployment benefit, which is excluded from GDP because it does not represent current production
What is a transfer payment?
The type of unemployment associated with the recessionary phase of a business cycle
What is cyclical unemployment?