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Scarcity

The lack of resources to produce enough goods to satisfy everyone's wants or needs

Factors of Production

Land, Labor, Capital, Entrepreneurship

Land

Factor of Production--Ground and resources contained within

Labor

Factor of Production--Number of workers and skill set

Capital

Factor of Production--Goods used to produce something else(technology, equipment)

Entrepreneurship

Factor of Production--How the other 3 factors are used together to create the final product

3 Economics Questions

What to produce, How to produce, For Whom to produce

Positive Statement

Statements of fact without opinon

Normative Statement

Statements disguised as opinions, look out for 'should'.

Opportunity Costs

The cost of one action due to the giving up of another(ex: going to a football game instead of studying).

Marginal Cost

The cost of producing one more unit or good

Production Possibilities Frontier

A graph comparing the relative cost of producing one good by considering the opportunity cost of another.

Demand

The willingness and ability to buy specific quantities of a good at alternative prices in a given period of time, ceteris paribus

Supply

The ability and willingness to sell(produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus

Law of Demand

a change in price will result in quantity demanded changing in the opposite direction

Equilibrium

The point at which the demand and supply curves/lines cross; leads to no shortage of surplus and maximizes overall profits

Price Ceiling

Government imposed price maximum that cannot be crossed by suppliers(producers).

Price Floor

Government imposed price minimum that cannot be crossed by suppliers(producers)

Market Mechanism

The use of market prices and sales to signal desired outputs(or resource allocations)

Market Failure

An imperfection in the market mechanism(ex: price ceiling/floor) that prevents optimal outcomes

Externalities

Costs(or benefits) of a market activity borne by a third party; the difference between the social and private costs(benefits) of a market activity

Effect of Externalities

The presence of externalities(taxes, tax rebates, ect) remove prices from being a valid measure of a good's societal value.

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