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Economics
The study of how to allocate scarce resources among competing ends.
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Scarcity
This occurs because our unlimited desire for goods and services exceeds our limited ability to produce them due to constraints on time and resources.
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Positive Economics
This type of economics describes the way things are.
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Normative Economics
This type of economics addresses the way things should be.
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Factors of Production/Inputs
- The resources used in the production process, including:
- Labor
- Human Capital
- Entrepreneurship
- Natural Resources/Land
- Capital
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Labor
The physical and mental effort of people.
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Human Capital
Knowledge and skills acquired through training and experience.
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Physical Capital
Manufactured goods that can be used in the production process, including tools, equipment, buildings, and machinery.
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Entrepreneurship
The ability to identify opportunities and organize production, and the willingness to accept risk in the pursuit of rewards.
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Natural Resources/Land
Any productive resource existing in nature, including wild plants, mineral deposits, wind, and water.
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Opportunity Cost
The value of the best alternative sacraficed as compared to what actually takes place.
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Trade-Offs
The cost of making one product (chair) over another (birdcage).
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Production Possibilities Frontier
An illustration showing the choices an economy faces and the opportunity cost of making one good rather than another.
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Efficiency
This occurs when an economy is using all of its resources productively.
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Slope
The "rise over run" of a line.
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Absolute Value
The value after removing the negative sign.
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