Economics: Scarcity and Tradeoffs

The limited nature of society’s resources.

The study of how society manages its scarce resources.

All decisions involve tradeoffs between alternatives.

Efficiency maximizes resource use, equality distributes prosperity uniformly.

The cost of something is what you give up to get it.

Incremental adjustments to an existing plan.

Make decisions by evaluating costs and benefits systematically.

Something that induces a person to act.

Specializing in a good or service allows for exchange, improving well-being for all.

An economic system where resources are allocated through buyers and sellers' interactions.

A theory by Adam Smith stating that self-interested actions can benefit society.

The maximum price a buyer is willing to pay for a good or service.

When a market does not allocate resources efficiently, resulting in loss of economic well-being.

When production or consumption of a good affects third parties not directly involved.

The amount of goods and services produced per unit of labor; key to higher living standards.

An overall increase in the general level of prices in an economy.

Society experiences a tradeoff between inflation and unemployment in the short run.

A model showing how dollars move between households and firms through markets.

Resources used to produce goods and services: labor, land, capital, entrepreneurship.

A graph showing the maximum combinations of two goods that can be produced with available resources.

The cost of forgoing the next best alternative when one option is chosen over another.

The PPF can be straight or bow-shaped, reflecting varying opportunity costs as resources shift.

Where firms buy inputs (labor, land, capital) from households to produce goods and services.

Production Possibility Frontier shows the maximum output combinations of two goods.

A PPF that indicates different resources and opportunity costs for goods.

Production points on the PPF line, meaning resources are fully utilized.

Points below the PPF line indicate wasted resources.

Points above the PPF line cannot be achieved with current resources.

Ability to produce a good at a lower opportunity cost than others.

Ability to produce more of a good with the same resources than another producer.

The trade-off of what you give up to obtain something else, calculated for each option.

The claim that the quantity supplied of a good rises when the price rises, indicating a direct relationship.

A table showing the relationship between the price of a good and the quantity supplied.

The costs of production inputs like wages and raw materials; lower input prices increase supply.

Technological advances reduce input requirements, increasing the quantity supplied at each price.

When sellers adjust supply based on anticipated future price changes, which can shift the supply curve.

The point where quantity supplied equals quantity demanded.

When quantity supplied is greater than quantity demanded, leading to excess supply.

When quantity demanded exceeds quantity supplied, causing excess demand.

Occurs when a non-price factor (like technology or costs) changes, affecting supply.

Changes in quantity supplied due to price changes along a fixed supply curve.

A shift occurs due to changes in non-price factors like income or number of buyers.

Occurs when price changes, affecting quantity demanded on a fixed demand curve.

Shifts in curves affect equilibrium price and quantity; direction matters.