Final Study Guide - Economics Chapter 1 Scarcity- inability...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics Chapter 1 Scarcity- inability to satisfy all our wants Incentive- reward that encourages an action or a penalty that discourages one Economics- social science that studies the choices that individuals make as they cope with scarcity and the incentives that influence and reconcile those choices Factors of Production- the productive resources through which goods and services are produced (land, labor, capital, entrepreneurship) Entrepreneurship is the human resource that organizes labor, land, and capital Social interest- choices that are best for society as a whole Globalization- the expansion of international trade and investment Tradeoff- an exchange, giving up one thing to get something else Opportunity Cost- the highest valued alternative that we give up to get something else Marginal Benefit- the benefit that arises from an increase in an activity Marginal Cost- the cost of an increase in an activity Economic theory- a generalization that summarizes what we think we understand about the economic choices that people make and the performance of industries and entire economies All economic questions arise from scarcity- from the fact that wants exceed the resources available to satisfy them Choices are made at the margin and respond to incentives Chapter 2 Production possibilities frontier- is the boundary between those combinations of goods and services that can be produced and those that cannot- shows the limits of production o We can produce at any point inside or on the PPF, these points are attainable o We cannot produce at points outside the PPF Production efficiency- if we cannot produce any more of one good without producing less of another good
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Marginal Cost- is the opportunity cost of producing one more unit of it- the slope of the PPF Marginal Benefit Curve- shows the relationship between the marginal benefit from a good and the quantity of that good consumed. Is it a general principle that the more we have of a good or service, the smaller it its marginal benefit and the less we are willing to pay for it- the principle of decreasing marginal utility Allocative efficientcy- when we cannot produce more of any good with giving up something we value more highly, we have achieved allocative efficiency- best point on PPF Economic growth- increases of standard of living but it doesn’t overcome scarcity and avoid opportunity cost Comparative advantage- an activity if that person can perform the activity at a lower opportunity cost than anyone else Absolute advantage- person who is more productive than all others Firm- an economics unit that hires factors of production and organizes those factors to produce and sell goods and services Market- any arrangement that enables buyers and sellers to get information and to do business with each other Property rights- the social arrangements that govern the ownership, use and disposal of anything that people value
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/09/2008 for the course ECON 2001 taught by Professor Parks during the Summer '07 term at Georgia Institute of Technology.

Page1 / 23

Final Study Guide - Economics Chapter 1 Scarcity- inability...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online