chapter1 - Economics:TheCoreIssues CHAPTER1...

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CHAPTER 1 Economics:  The Core Issues
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Economics – Core Issues Economics  is the study of how best to allocate scarce  resources among competing uses. WHAT  to produce with our limited resources. HOW  to produce the goods and services we select. FOR WHOM  goods and services are produced; that is, who  should get them.
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The Economy Is Us The  economy  is an abstraction that refers to the sum  of all our individual production and consumption  activities. The economy is us — the aggregation of all of our  supply and demand decisions.
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Scarcity Scarcity  is the lack of enough resources to satisfy all  desired uses of those resources. LO1
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Factors of Production Factors of production  are resource inputs used to  produce goods and services. Land  refers to all natural resources such as crude oil, water, air,  and minerals. Labor  refers to the skills and abilities to produce goods and  services. Capital  includes the final goods produced for use in the  production of other goods, e.g., equipment, structures. Entrepreneurship  is the assembling of resources to  produce new or improved products and technologies.
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Limits to Output No matter how an economy is organized there is a  limit to how fast it can grow. The most evident limit is the amount of resources  available for producing goods and services. Scarcity – the imbalance between our desires and  available resources – forces us to make economic  choices. LO1
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Opportunity Costs Opportunity cost  is the most desired goods or  services that are forgone in order to obtain  something else. It is what is given up in order to get something else. Everything has an opportunity cost – there is  no free  lunch .
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Production Possibilities Production possibilities  are the alternative  combinations of final goods and services that could  be produced in a given period of time with all  available resources and technology.
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