scarcity
- the condition in which our wants as a society are greater than our limited resources
- economists define almost all productive resources as scarce- with rare exceptions like “established knowledge”
economic resources(aka factors of production)
land, labour, capital, entrepreneurship
what are the types of income?
- rent
- wages
- interest
- profit
what are the three fundamental economic questions?
- what goods and services will be produced?
- how will they be produced?
- who will get the goods and services?
what are the three types of economies?
command, mixed, market
command economy
- gov’ is responsible for answering all 3 economic questions
- individuals have very little economic freedom
- ex: North Korea
mixed economy
- economic decisions are made by both the gov’ and individuals
- most economies in the world are mixed
- ex: Canada, New Zealand
market economy
- all economic decisions are made by the individuals in the society
- all the economic freedom
- very competitive
- private ownership of resources
- consumer demand is the driving force behind what is produced
what are the 4 types of opportunity costs(PPC)?
constant, decreasing, increasing, zero
efficient economy
- when is there are no lost opportunities meaning that there is no way to make anyone better off without making at least one person worse off
- includes both productive efficiency and allocative efficiency
opportunity cost
the value of the next best alternative that you must give up in order to get the item
land(economic resource)
all of the resources found in nature. Payment for the use of the land is called rent
Ex: water, air
labour(economic resource)
includes all types of human effort. Payment for the use of labour is called wages
Ex: flight attendant, post office worker, factory workers
capital(economic resource)
all of the machinery, tools, and equipment used by humans in the production process. Payment for the use of capital is called interest.
Ex: bulldozer, dump truck, fishing rods, oil rigs, calculator, pen, video camera
entrepreneurship(economic resource)
innovation and ideas. Payment for entrepreneurship is called profit.
Ex: dad
microeconomics
the study of small economic units such as individuals, firms, and industries (competitive markets, labour markets, personal decision making, etc)
macroeconomics
the study of the large economy as a whole or in its basic subdivisions (national economic growth, government spending, inflation, unemployment, etc)
positive economic statement
- a statement about WHAT IS
ex: the government is spending 100000 a year on exporting goods
normative economic statement
- a statement about WHAT SHOULD BE
ex: the government should spend 1000000 a year on exporting goods
economics
the study of scarcity and choices
efficiency: productive
- products are being produced in the least costly way
- ANY point on the production possibilities curve
efficiency: allocative
- products being produced are the ones most desired by society
- the OPTIMAL point on the production possibilities curve depends on the desires of society
zero production possibilities curve characteristics
- the opportunity cost of producing another unit is constant
- resources are completely adaptable to alternative uses
absolute advantage
the producer who can produce the most output OR requires the least amount of inputs(resources)
*to find out who has the absolute advantage, look at the endpoints, whoever makes the most has the absolute advantage”
