The study of how societies and people choose to use limited resources to satisfy unlimited wants and needs
Limited resource to fufill unlimited want and needs
Those things which make our lives more comfortable but are not needed for survival; examples - cell phone, car, movie tickets, etc.
Those things that are necessary for survival; example - food, water, shelter, etc.
Things that can be bought and sold
Work that is performed for someone else
3 Basic Economic Questions
What to produce?
How to produce?
For whom to produce?
Natural resources that can be replaced such as trees or water
Natural resources that cannot be replaced or cannot easily be replaced such as minerals and oil
Factor of production; workers
Factor of production; raw materials supplied by nature that come from the earth, the water, or the air and are used to produce goods
Factor or production; Any human-made resource that is used to create other goods and services or money for investment in the business
Factor of Production ; business owners or inventors; the bring land, labor and capital together to start or operate a business
The things that we give up when we decide to do one thing over another
The alternative we face when we decided to do one thing over another; can be both acceptable and unacceptable/negative; almost like costs and benefits
Businesses use them to encourage someone to do something/buy their products, etc.; examples - coupons, rewards, etc.
Business costs that do not depend on the level of production; costs that don't change; example - rent
Business costs that change depending on the firm's level of production; example - wages and material
The overall cost of operating at a particular rate of production; Fixed costs + Variable costs
The costs and benefits of producing an additional good or service; as long as the marginal beneifts outweight the marginal costs than the business should continue to produce
The supply of goods and services
The demand of consumers
Determined by supply and demand; producers and consumers
Division of Labor
Breaks down a job into a series of specific tasks for maximum production
Each worker focuses on one or a few tasks which allows them to become good at it; the specific tasks and skills that an individual contributes to the division of labor
Uses division of labor and specialization; in a factory, an arrangement where a product is moved from worker to worker, with each person performing a single task in the making of the product.
A way of spending money in order to get more money, goods, or services later
The factors of production; such as land, labor, capital, and entrepreneurship; used to produce outputs
The goods and services the economy produces using inputs (the factors of production)
The amount of goods and services and economy creates; the quantity of goods and services produced from each unit of labor input
Money left over after all expenses have been paid; the reward for the risk of entrepreneurs
Law of Diminishing Marginal Returns
If each extra unit of output requires a growing amount of input to produce it, the business is facing diminishing returns;
the more a business produces over time, the less money it will make on that good or service; when this point is reached the business should find a way to become innovative