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).
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.
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.
What is "opportunity cost"?
Opportunity cost is the value of the next best alternative that is foregone when making a decision.
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.
How do people make decisions in marginal analysis?
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.
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 "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.
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.
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.
What happens as the production of one good increases?
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.