Unit 1: Scarcity & Opportunity Cost Vocabulary

What is Economics ?

• Study of how people & societies use limited resources to satisfy unlimited wants; management of scarcity & choice.

• The decision by individual of what to do, which necessarily involves decision of what not to do.

• Anything (land, labor, and capital) that can be used to produce something else; including natural resources (from physical environment) and human resources (labor, skill, intelligence).

What is Individual Choice ?

• Study of how people & societies use limited resources to satisfy unlimited wants; management of scarcity & choice.

• The decision by individual of what to do, which necessarily involves decision of what not to do.

• Anything (land, labor, and capital) that can be used to produce something else; including natural resources (from physical environment) and human resources (labor, skill, intelligence).

What is a Resource ?

• Study of how people & societies use limited resources to satisfy unlimited wants; management of scarcity & choice.

• The decision by individual of what to do, which necessarily involves decision of what not to do.

• Anything (land, labor, and capital) that can be used to produce something else; including natural resources (from physical environment) and human resources (labor, skill, intelligence).

What is Scarce / Scarcity ?

• Short supply; not enough resources to satisfy all ways society wants to use them.

• Best alternative that we forgo, or give up, when making a choice or decision.

What is Opportunity Cost ?

• Short supply; not enough resources to satisfy all ways society wants to use them.

• Best alternative that we forgo, or give up, when making a choice or decision.

What is Trade ?

• In market economy, individuals provide goods & services to others & receive goods & services in return.

• Comparison of costs & benefits of doing something.

• By dividing tasks & trading, people get more of what they want thru trade than they could if they tried to be self-sufficient.

What is a Trade-Off ?

• In market economy, individuals provide goods & services to others & receive goods & services in return.

• Comparison of costs & benefits of doing something.

• By dividing tasks & trading, people get more of what they want thru trade than they could if they tried to be self-sufficient.

What are the Gains from Trade ?

• In market economy, individuals provide goods & services to others & receive goods & services in return.

• Comparison of costs & benefits of doing something.

• By dividing tasks & trading, people get more of what they want thru trade than they could if they tried to be self-sufficient.

What is Marginal Decision ?

• Decision made at the "margin" of an activity to do a bit more or a bit less of an activity.

• Type of cost-benefit decision making that compares extra benefits to extra costs of an action.

What is Marginal Analysis ?

• Decision made at the "margin" of an activity to do a bit more or a bit less of an activity.

• Type of cost-benefit decision making that compares extra benefits to extra costs of an action.