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Published byHannah Alyson Bailey Modified over 9 years ago
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What is Economics?
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The study of how people seek to satisfy their needs and wants by making choices Three groups: Individuals Businesses Governments
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Limited quantities of resources to meet unlimited wants
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Occurs when producers will not or cannot offer goods or services at the current prices
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Resources that are used to make all goods and services Land →all natural resources in or on it Labor →effort made by a person Capital →physical capital: buildings, pencils, dishwashers →human capital: knowledge and skills
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Men and women who decide how to combine land, labor and capital to create new goods and services
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The most desirable alternative given up as the result of a decision
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Alternatives that either individuals, businesses or society give up when they take one course of action over another
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Thinking at the margin Deciding whether to do or use one additional unit of some resource Deciding at the margin can only be used when alternatives can be divided into increments Decision Making Grid is a visual way of examining opportunity cost.
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Production Possibilities Curve: A graph that shows alternative ways to use an economy’s resources Factors of production (land, labor and capital) are used to determine how much of a good or service can be produced Production possibilities graphs can show us if an economy has grown or shrunk while showing the opportunity costs Efficiency, Growth and Costs are factors that can be seen from production possibility graphs
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Using resources in such a way as to maximize the production of goods and services When this condition is present it is called the production possibilities frontier Underutilization : Using fewer resources than the economy is capable of supplying
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Condition that reflects a change in factors of production or when resources increase When an economy grows the curve shifts to the right Production capacity can also decrease causing the curve to shift left
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It is not necessarily money but the opportunity we give up when we choose one option over the other Law of increasing costs : As production switches from one item to another more resources are needed to increase production of the second item. **This is why production possibility frontiers usually curve**
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Two areas that often change Economists collect data to create production possibility curves based on which goods and services a country can produce based on current resources Resources include land and natural resources, work force, human and physical capital Technology is considered both human and physical capital
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What to produce?
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If the economy is not using all its resource it is operating inefficiently.
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