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examines how individuals, institutions, and society make choices under conditions of scarcity





3 basic economic questions

what to produce? how to produce? for whom to produce?


the pleasure, happiness, or satisfaction obtained from consuming a good or service

opportunity cost

the next best alternative foregone when an economic decision is made

rational decision making

the process of weighing up the opportunity cost and benefits of an activity


everything that grows on land or is found under it and everying in or under the sea


physical and mental contribution of individuals


all manufactored aids used in producing consumer goods/services satisfy our wants indirectly because they aid in the production of consumer goods


starting the business(raising capital)

command economy

the government answers all economic equations

free market economy

individuals answer all economic questions. all production is in private handsd and supply/demand set wages and prices in the economy.

transition economies

movement of countries from command to market

mixed economies

every country is mixed. different combinations. part command, part market

ceteris paribus

holding all but one of the variables constant "all things being equal"


facts/ cause-and-effect relationships "what is" deals w/ areas that are capable of being proven to be correct or not. Deals w/ what the economy is actually like


judgements/opinions "what ought to be" looks at the desirability of certain aspects of the economy. deals w/ areas that are open to personal opinion and belief


graphical representation of 2 goods that can be produced if an economy, firm, etc. uses its resources fully and efficiently

economic growth

the increase in real national income per capita (movement inside ppc closer towards the curve)

economic development

a measure of welfare, a measure of how wonderful life is

sustainable development

development that meets the needs of the present without compromising the ability of future generations to meet their own needs


The situation in which unlimited wants exceed the limited resources available to fulfill those wants.

what does scarcity do?

restricts options and demands choices


payment for land


payment for labor


payment for capital


payment for entrepreneurship

china textiles

example command economy


having allowed effects of inflation

national income

value of all goods and services produced in an economy during a time period

per capita

per head/population

welfare of people

what does the ppc not tell you?

land, labor, entrepreneurship, capital

factors of production

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