Economics Chapter 1 Flashcards

Basic Economic Concepts

• Need: Essential for survival; includes food, water, shelter.
• Want: Desires beyond necessities; not essential for survival.
• Goods: Tangible items produced for consumption.
• Services: Activities performed by one individual for another, often to fulfill needs or wants.

Scarcity and Choice

• Scarcity: Limited availability of goods and services compared to unlimited wants, necessitating choices.
• Shortage: A condition where demand exceeds supply at a specific price, leading to unfulfilled consumer wants.

Entrepreneurs and Production

• Entrepreneur: Individual who innovatively combines resources to create goods and services.
• Factors of Production: Resources used to produce goods and services, categorized into land, labor, and capital.

Types of Resources

• Land: Natural resources employed in production (e.g., raw materials).
• Labor: Human effort devoted to tasks for compensation.
• Capital: Man-made resources facilitating production; includes two types:
  • Physical Capital: Tangible tools and equipment used in the production process.
  • Human Capital: Skills and knowledge gained by workers through education and experience.

Decision-Making in Economics

• Trade-off: The sacrifice of one benefit to achieve another, reflecting the opportunity cost of choices made.
• Guns or Butter: Represents the economic trade-off between military and consumer goods production.
• Opportunity Cost: The next best alternative foregone when making a decision.

Marginal Analysis

• Thinking at the Margin: Evaluating the decision to use or produce one additional unit of a resource.
• Cost/Benefit Analysis: A process comparing the sacrifices required and potential gains of a specific action.
• Marginal Cost: The additional cost incurred from producing one more unit.
• Marginal Benefit: The additional benefit gained from producing one more unit.

Production Possibilities

• Production Possibilities Curve (PPC): Graphical representation showing different ways to utilize an economy's resources.
• Production Possibilities Frontier (PPF): The boundary on the PPC illustrating the maximum output achievable.
• Efficiency: Effective resource utilization to maximize output levels of goods and services.
• Underutilization: Utilizing fewer resources than what is possible, leading to lost potential in production.

Economic Growth and Costs

• Law of Increasing Costs: Indicates that shifting production from one good to another requires progressively more resources, reflecting escalating costs associated with diversifying production.

Explore essential terms in Economics with this set of flashcards from Chapter 1. Each card presents a key concept, including definitions for 'need', 'want', 'goods', 'services', and 'scarcity'. Perfect for reinforcing your understanding of basic economic principles.