Economics-Chapter 1 What Is Economics?

What is the production possibilities frontier

a curve on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.

What is the "law of increasing costs"

As you shift methods of producing different goods, cost of production for different good costs more Converting Office Depot from pet store instead of building pet store from scratch

What is a cost-benefits analysis chart?

Compare costs of giving something up to benefits we are going to receive Is it worth it?

What is the major issue in economics?

Concept of scarcity (limited quantity of resources to meet unlimited wants) Everything in the world is scarce Ex. only so much clean air, gas, water We need to make choices

How do entrepreneurs fit in an economics system?

Individual who pulls factors of production together

How is scarcity different from a shortage?

Shortage: you cannot offer goods and services at current prices Ex. no toilet paper when covid first hit Scarcity always exists

What is the definition of economics?

Study of how people seek to satisfy their wants and needs by making choicess

How do governments deal with economic scarcity issues (guns vs butter)?

Focus more on military goods? Or consumer goods? Every country has to make these decisions

What is the difference between a good and a service?

Good: physical object (ex. A pencil, gavel) Service: actions performed by one person for another (ex. mechanic)

What are production possibilities graphs?

Graph that shows alternative ways to use an economy's resources

Physical Capital

(human made objects used to create other goods and services) - Tools - Computers

Human Capital

(knowledge that a worker gains through education and experience) - Identifying things that make you valuable

What are "costs" in an economic system?

Alternatives that you are sacrificing

What are opportunity costs?

Most desirable alternative given up as a result of a decision Rarely live with only having two choices

How is a need different from a want?

Need: basics: food, clothing, shelter Want: everything else

What are trade offs?

One thing is chosen, other has to be sacrificed Alternatives that we sacrifice when we make a choice

What are the factors of production?

Resources we use to produce goods and services Land (natural resources) Labor (effort a person does to a task which they are paid)

How does the concept of "thinking at the margin affect economic decision-making?

Thinking at the margin: deciding to use one additional unit of resource

What is the concept of underutilization?

Using fewer resources than an economy is capable of using Ex. drought results in less crops being produced

How does efficiency affect economics?

Using resources to maximize goods and services

What is economic growth?

Using some new resource or product to increase productivity Ex. google docs instead of word processor