the study of how people seek to satisfy needs & wants by making choices
why do choices have to be made?
- scarcity of resources- is the basis of economics
- basic economic problems- leads to shortage of goods & services
- scarcity- permanent problem we face w "factors of production"
- shortage- temporary situation, can find new/recover "factors of production"
- land- materials found in nature
- labor- effort someone devotes to a task & they're paid
- capital- human made resources used to produce other goods or services
-physical capital: good that helps produce other goods or services
-technology: advances in process to make a good or service
- entrepreneur(ship)- people who take risks to combine land, labor, & capital to create new goods/services
all choices given when choice is make
opportunity cost:
the best or most valued alternative that is given up when choice is made
production possibility frontier: combination of goods produced utilized to full potential
in the face of scarcity, countries use:
- development of cheaper or substitute resources
- specialization of labor
- mass production
- economic efficiency- maximize resources
- economic freedom- get to choose profession, what to buy, etc.
- economic security- predictability
- economic equity- fair distribution of wealth
- economic growth- improve level of prosperity
- full employment- provide jobs
no government interaction in economy
factor market:
money flows from firms to households
businesses purchase factors of production (raw materials) to make finished products
households sell factors of production for income
product market:
money flows from households to firms for finished goods
businesses sell goods & services for a set price
individuals in households purchase goods & services
mixed economy:
government plays an active role in economy
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