Intro to Economics: Chapter 1

Law of Increasing Opportunity Cost

A bowed PPC. Resource are not completely adaptable to alternative uses.

Entrepreneur

A person who organizes, manages, and assembles the other factors of production to produce goods and services.

Scarcity

A situation where there are limited amounts of resources to satisfy unlimited material wants.

Efficiency

All resources are being used, maximum output. When the economy is operating along the PPC.

Economic Sanctions

Boycotts, embargoes, and other economic measures that one country uses to pressure another country into changing its policies.

Capital Goods

Factories and machines, used to produce other goods and services in the future. A source of economic growth potential.

Macroeconomics

Focuses on the overall performance of the economy. Deals with the determination of total output, the level of employment, and the price level.

Consumer Goods

Goods such as food, electricity, and clothing that are available for immediate use by households. They do not contribute to future production in the economy.

Production Possibilities Curve

Illustrates graphically the maximum combinations of two goods that an economy can produce, given its available resources and tech.

Economic Growth

Increased productive capabilities of an economy that are made possible by either an increasing resource base or technological advancement.

Factors of Production

Inputs used in the production of goods and services that we want.

Capital

Investment goods, refers to goods that are used to produce other goods and services. Machinery, tools, computers, computer software, buildings, etc.

Straight PPC

No Law of Increasing Opportunity Cost

Margin

People make better choices when thinking at the

Rational Self Interest

People try to make the best of any situation, usually by maximizing the value of some quantity.

Land

Refers to all-natural resources- such as raw materials, land, minerals, forests, water, and climate- used in the production process.

Economic Models

Simplified versions of the real world that we use to help understand, explain, and predict economic phenomena in the real world.

Positive Economics

The branch of economic analysis that describes the way the economy actually works. Questions of fact.

Microeconomics

The branch of economics that focuses on the choices made by households and firms.

Capacity Utilization Rate

The ratio of an industry's production to its capacity.

Economics

The study of choice under conditions of scarcity.

Opportunity Cost

The value of the best alternative that is sacrificed in a decision.

Labor

This resource includes all physical and mental efforts that people make available for production.

Normative Economics

Underlaid by ethical standards and norms of fairness. Involves value judgments, cannot be tested.

Inefficiency

When the economy fails to realize the output potential of its production possibilities curve, below the curve.