2.  Citizens must make them every day.  Choices occur because resources are limited  Needs are required, such as food and shelter  Wants make life more comfortable and enjoyable, like vacations

3.  Economics is the study of decisions made in a world of limited resources How things are made, bought, sold and used

4.  Economic models include: Microeconomics: focuses on the small picture (individuals and businesses) Macroeconomics: focuses on the big picture (governments, whole industries, societies)  US functions on free enterprise capitalism-produce things their people want and need

5.  Scarcity means there is not enough  Scarcity of resources forces people to make economic decisions No country has enough resources to produce what is necessary

7.  Countries have to make choices: What to produce? How to produce? For whom to produce?

8.  People must understand the costs and benefits of economic choices to make the best choice  A trade-off requires someone to decide to do one thing rather than another Made by individuals, businesses, societies

10.  Opportunity cost is the second best use after choosing one thing over another Includes money, time, inconveniences, and so on

11.  There are ways to measure different types of costs and benefits.

12.  Types of Costs: Fixed: does not change; has to be paid no matter what Variable: changes based on what is produced Total: fixed costs + variable costs Marginal: cost of producing one additional unit of output

13.  Types of Revenues (money coming in) Total revenue = number of units sold multiplied by average price per unit Marginal revenue: made by selling one extra unit of a product

14.  Marginal benefit is an additional benefit associated with an action  Cost-benefit analysis requires rational economic decision making