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Scarcity: fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources
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Economics: science that deals with production, distribution, consumption of goods/services, or material welfare of humankind; financial considerations; economically significant aspects
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1st Pillar of Wisdom: nothing in our material world can come from nowhere, nor be free; everything in our economic life has a source, destination, and cost that must be paid by someone
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5 Key Economic Assumptions:
1) society’s wants are unlimited, but ALL resources are limited (Scarcity)
2) due to scarcity, choices are mandatory. Every choice has a cost. (Trade -Off)
3) everyone’s goal is to make choices that maximize satisfaction. Everyone acts in own “self-interest”
4) everyone makes decisions by comparing marginal costs and marginal benefits of every choice.
5) real-life situations can be explained and analyzed through simplified models and graphs
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Ceteris Paribus: other conditions remain the same; “all other things being equal” latin
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Opportunity Costs: loss of potential gain from other alternatives when one alternative is chosen
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Marginal Costs: change in opportunity costs that arises when quantity produced is incremented by one unit
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Marginal Benefits: additional satisfaction or utility that a person receives from consuming additional unit of a good or service
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Marginal: something that will be added to what was existed
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Macroeconomics: large scale or general economic factors, such as interest rates and national productivity
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Microeconomics: single factors and effects of individual decisions
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Utility: measure of value a consumer obtains from goods
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Allocate: allocation of resources are analysis of how scarce resources are distributed among producers
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Price: amount of money paid to quire given product
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Cost: combination of gains and losses of any goods that have value attached by any individual
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Investment: asset or item purchased with hopes that it generates income or future appreciation
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Goods: materials that provide utility and human wants
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Consumer Goods: food, clothing, that satisfy human use and consumption
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Capital Goods: tangible property; produce other goods or service within certain time period; input; ex: buildings, cars, steel, ect.
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Services: economical activity that an immaterial exchange of value occurs; work performed for someone else; ex: tire repair, lawn mowing, ect.
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Explicit Costs: direct payment made to others in running business, like wage, rent or material
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Implicit Costs: no actual payment is made; give up order to use factor of production for already owns
Scarcity: fundamental economic problem of having seemingly unlimited human wants and needs in a world of limited resources
Economics: science that deals with production, distribution, consumption of goods/services, or material welfare of humankind; financial considerations; economically significant aspects
1st Pillar of Wisdom: nothing in our material world can come from nowhere, nor be free; everything in our economic life has a source, destination, and cost that must be paid by someone
5 Key Economic Assumptions:
Ceteris Paribus: other conditions remain the same; “all other things being equal” latin
Opportunity Costs: loss of potential gain from other alternatives when one alternative is chosen
Marginal Costs: change in opportunity costs that arises when quantity produced is incremented by one unit
Marginal Benefits: additional satisfaction or utility that a person receives from consuming additional unit of a good or service
Marginal: something that will be added to what was existed
Macroeconomics: large scale or general economic factors, such as interest rates and national productivity
Microeconomics: single factors and effects of individual decisions
Utility: measure of value a consumer obtains from goods
Allocate: allocation of resources are analysis of how scarce resources are distributed among producers
Price: amount of money paid to quire given product
Cost: combination of gains and losses of any goods that have value attached by any individual
Investment: asset or item purchased with hopes that it generates income or future appreciation
Goods: materials that provide utility and human wants
Consumer Goods: food, clothing, that satisfy human use and consumption
Capital Goods: tangible property; produce other goods or service within certain time period; input; ex: buildings, cars, steel, ect.
Services: economical activity that an immaterial exchange of value occurs; work performed for someone else; ex: tire repair, lawn mowing, ect.
Explicit Costs: direct payment made to others in running business, like wage, rent or material
Implicit Costs: no actual payment is made; give up order to use factor of production for already owns
Also, scarcity is permanent which means that no matter what we do there will always be limited resources and unlimited wants. On other hand, shortage is temporary because more goods are always made.
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