What is Economics?

Shortage

Not the same as Scarcity. A shortage is a temporary situation. Occurs when a supplier cannot or will not offer goods or services at current prices.

Scarcity

All goods and services we produce are scarce. Scarcity implies quantities of resources to meet unlimited wants. Scarcity always exists because our needs and wants are always greater than our resource supply.

Scarce Resources

All resources are scarce because the land, labor, and capitol used to create them are scarce.

Efficiency

Using resources I such a way as to maximize the production or output of goods and services.

Goods

Goods are physical objects such as food, clothing, cars, electronics, etc.

Services

Services are actions or activities that one person performs for another- for example, haircuts, tutoring, lawn mowing, etc.

What is Economics?

Economics is the study of how people seek to satisfy their needs and wants by making choices. Economics is about solving the problem of scarcity.

Factors of Production

Economists call resources used to make all goods and services the Factors of Production or Factor Resources

Human Capitol

Knowledge and Skills- People investing in themselves

What are the Factors of Production?

Land, Labor, and Capitol

Opportunity Costs

The most desirable opportunity given up as a result of a decision (or trade off) For example the family bought a new computer but now there are no funds to take a vacation

Law of Increasing Costs

as production switches from one item to another, more resources are necessary to increase production of the second item.

Trade Offs

All the alternatives that we give up whenever we choose one course of action over another.Economists simplify the explanation of trade offs that countries face by using the example of guns and butter. A country that decides to produce more military goods ("guns") has fewer resources to devote to consumer goods ("butter").

Capitol

Any human made resource used to produce other goods and services. There are two types of capitol: Physical and Human. An economy requires both physical and human capitol to produce goods and services.

Physical Capitol

Human made objects used to create other services.

Production Possibilities Curve

A curve that shows alternative ways use a country's resources.

Labor

The effort that a person devotes to a task for which he is paid. For example doctor services, factory and assembly line workers, retail sales people, mechanics, etc.

Entrepreneurs

People who decide how to combine land, labor, and capitol resources to create new goods and services. These people take risks to develop original ideas, start businesses, create new industries, and fuel economic growth.

Production Possibilities Frontier

The line drawn to show the combinations of the production of both choice. Represents an economy working at its most efficient level of production.

Land

The term land is used to refer to all natural resources used to produce goods and services. Natural resources are found in nature for example land, water, trees, coal, etc.

Underutilization

Using fewer resources than the economy is capable of using.