Economics: The discipline that examines...

...how to most efficiently use limited resources to satisfy unlimited wants and needs.

Factors of Production

Land, labor, capital, and entrepreneurship; the four groups of resources that are used to make all goods and services.

Land

Natural resources that are used to make goods and services.

Labor

People with all their efforts, abilities, and skills involved in producing goods or services.

Capital

Any human made resource that is used to create other goods or services.

Entrepreneurship

The organizational abilities and risk taking involved in starting a new business or introducing a new product.

Technology

The use of science to develop improved goods and services, and provide better ways to produce them.

Scarcity

Limited quantities of resources to meet unlimited wants.

What is the fundamental economic problem?

Allocation of scarce resources among competing uses

making choices among limited possibilities

What do resources constraints mean for consumers?

Opportunity Cost

the value of the best forgone alternative

What is the reason for increasing costs?

resources are not perfectly adaptable among uses (resources are specialized)

Principles of increasing costs

as the production of a good expands, the opportunity cost of producing another unit increases

Comparative Advantage

the ability to produce a good at a low opportunity cost than another producer

specialization/division of labor

What does a market system feature?

What does the Production Possibilities Frontier (PPF) do?

Shows combinations of products that can be produced with available resources and existing technology

Optimal Decision

the choice that best serves the goal of the decision maker

Economic Efficiency

Absence of waste