Fundamentals of Economics
What is the difference between "needs" and "wants"?
Needs are things required for survival (e.g., food, water, shelter), while wants are things that are not necessary but desired (e.g., luxury items, entertainment).
Why does every society face scarcity and choice?
Scarcity exists because resources are limited, and choice is necessary because societies must decide how to allocate those limited resources among competing needs and wants.
What does "trade-off" mean in economics?
A trade-off is the concept that in order to gain something, you must give up something else due to limited resources.
This factor of production includes natural resources such as forests, water, and minerals.
What is land?
What is a production possibilities curve (PPC)?
A PPC is a graph that shows the maximum possible combinations of two goods or services that can be produced with a given set of resources and technology.
What are "goods"?
Goods are tangible items that satisfy human wants and needs, such as clothes, food, and electronics.
How do entrepreneurs contribute to economic growth?
Entrepreneurs create new businesses, introduce innovative products, and drive technological advancements, which fuel economic growth and create jobs.
What is "opportunity cost"?
Opportunity cost is the value of the next best alternative that is foregone when making a decision.
This type of capital refers to tools, machinery, and buildings used in production.
What is physical capital?
What does a production possibilities frontier (PPF) represent?
A PPF represents the maximum output combinations of two goods that an economy can achieve given its resources and technology.
What are "services"?
Services are intangible actions or activities that provide value to people, such as healthcare, education, and entertainment.
What are the three economic factors of production?
The three economic factors of production are land, labor, and capital.
How do people make decisions by thinking at the margin?
People make decisions by comparing the additional benefits of an action with the additional costs. If the marginal benefit outweighs the marginal cost, they proceed with the decision.
The workforce that contributes effort, skill, and time to the production process.
What is labor?
What is "efficiency" in terms of a production possibilities curve?
Efficiency occurs when an economy is operating on the PPF, meaning it is using all of its resources fully and effectively.
What does "scarcity" mean in economics?
Scarcity refers to the limited availability of resources to meet unlimited wants and needs.
What is the difference between physical capital and human capital?
: Physical capital refers to tangible assets like machinery and buildings, while human capital refers to the skills, knowledge, and abilities of the workforce.
What is "cost/benefit analysis"?
Cost/benefit analysis involves comparing the costs of a decision or action with the potential benefits to determine if it's worth pursuing.
Education, training, and experience that improve worker productivity are examples of this type of capital
What is human capital?
What is "underutilization" on a production possibilities curve?
Underutilization occurs when an economy is operating inside the PPF, indicating that it is not using all of its resources efficiently.
What is "economics"?
Economics is the study of how people, businesses, and governments make choices about how to allocate scarce resources to meet their needs and wants.
How does scarcity affect the factors of production?
Scarcity forces societies to make choices about how to allocate their limited resources (land, labor, capital) to produce goods and services efficiently.
What is the difference between marginal cost and marginal benefit?
Marginal cost is the additional cost of producing one more unit of a good or service, while marginal benefit is the additional benefit received from consuming one more unit of that good or service.
Individuals who combine land, labor, and capital to create goods and services while taking on financial risks.
Who are entrepreneurs?
What is the law of increasing costs?
The law of increasing costs states that as production of one good increases, the opportunity cost of producing additional units of that good also increases.