Econ Chapter 1 Flashcards

Questions and Answers

Define scarcity.

When there are not enough resources to meet human wants.

Why does scarcity force choice-making?

People have to choose their wants.

What are the four factors of production?

Land, Labor, Capital, Entrepreneurship.

What is the factor of production: Land?

Natural resources used to produce goods and services, e.g., trees. Signup and view all the answers

What is the factor of production: Labor?

All human time, effort, and talent that goes into the production of goods and services, e.g., employee. Signup and view all the answers

What is the factor of production: Capital?

Physical resources used to produce goods and services, e.g., oven, cash register. Signup and view all the answers

What is the factor of production: Entrepreneurship?

Represents the risk-takers who contribute creative vision, ingenuity, and money, e.g., boss, CEO, owner. Signup and view all the answers

Define opportunity cost.

The value of the next best alternative given up to get something else that is wanted. Signup and view all the answers

Define trade-offs.

Alternatives people give up when they make choices. Signup and view all the answers

What is the difference between trade-offs and opportunity cost?

The trade-off is a bypassed alternative where an opportunity cost is the value associated with it. Signup and view all the answers

What does a production possibilities curve represent?

Point A: represents efficiency, Point B: represents impossibility, Point C: represents underutilization. Signup and view all the answers

Define efficiency.

Condition in which economic resources are being used to produce the maximum of goods and services. Signup and view all the answers

Define underutilization.

Condition in which economic resources are not being used to their full potential. Signup and view all the answers

Study Notes

Scarcity

Defined as the situation where resources are insufficient to satisfy human desires.
Requires individuals and societies to prioritize their wants.

Choice-Making

Scarcity necessitates decision-making as people must select among competing wants.

Factors of Production

Four main factors: Land, Labor, Capital, and Entrepreneurship.

Land

Refers to natural resources utilized in producing goods and services.
Examples include forests, minerals, and water.

Labor

Encompasses all human efforts, skills, and time involved in production.
Includes any invested work by employees and workers.

Capital

Represents physical resources that contribute to the production of goods and services.
Examples are equipment like ovens and cash registers.

Entrepreneurship

Involves individuals who take risks to innovate and drive production.
Key figures include business leaders such as CEOs and business owners.

Opportunity Cost

Defined as the value of the next best alternative that is forgone in making a decision.
Highlights the trade-off between different choices.

Trade-Offs

Refers to the alternatives that individuals give up when making decisions.
Involves sacrificing some resources or benefits to gain others, not an all-or-nothing scenario.

Difference Between Trade-Offs and Opportunity Cost

Trade-offs refer to the alternatives that are passed over, while opportunity cost measures the value lost from the next best option.

Production Possibilities Curve (PPC)

Visual representation of production efficiency and potential.
Point A indicates efficiency in resource utilization.
Point B illustrates production limits under current resources.
Point C shows underutilization of resources where they are not employed to full potential.

Efficiency

Describes a scenario where resources are fully and effectively utilized to maximize outputs of goods and services.

Underutilization

Indicates a state where economic resources are not being employed to their maximum potential, resulting in lost opportunities.

Description

Test your knowledge of basic economic concepts with these flashcards from Chapter 1. Learn about scarcity, choice-making, and the four factors of production. Ideal for students seeking to grasp fundamental economic principles.