Chap_1-5_review - Chapter 1 Economics study of how best to...

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Chapter 1 Economics: study of how best to allocate scarce resources among competing uses Scarcity: lack of enough resources to satisfy all desired uses of those resources Opportunity Cost: what is given up to obtain something else. Shows choices and alternatives o Every time we use scarce resources in one way, we give up opp to use them in other ways Entrepreneurship: assembling of resources to produce new or improved products and technologies. See opportunity for better products and brings together the resources needed for producing them Factors of Production: o Land- all natural resources o Labor- skills and abilities to produce goods and services o Capital- final goods produced for use in further production o Entrepreneur- person Production Possibilities Curve: the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology. Hypothetical choices with the implied opp cost of each choice. Each point on curve= different mix of output. Law of increasing opportunity cost: we must give up ever increasing quantities of other goods and services in order to get more of a particular good Efficiency: getting maximum output of a good from the resources used in production (anywhere along the ppc) Economic Growth: outward shift of the production possibilities curve. An increase in output (real GDP). Higher standard of living
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