mr. bordelon university high school. what is economics?
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Economic Decision-MakingReview
Mr. BordelonUniversity High School
Key Concepts What is economics?
Key Concepts What is economics?
o The study of how people, businesses, and nations make choices to satisfy their wants and needs.
Key Concepts Utility
Key Concepts Utility
o Economicky way of saying “satisfaction.”
Key Concepts A limited amount of resources to meet an
unlimited amount of needs and wants.
Key Concepts A limited amount of resources to meet an
unlimited amount of needs and wants.o Scarcity.
Key Concepts The amount of choices available at any one time.
Key Concepts The amount of choices available at any one time.
o Trade-offs.
Key Concepts Opportunity cost
Key Concepts Opportunity cost
o The value of the best alternative not chosen.
Key Concepts The resources used to make goods and services.
Key Concepts The resources used to make goods and services.
o Factors of production
Key Concepts What are the factors of production?
Key Concepts What are the factors of production?
o Lando Laboro Capitalo Entrepreneurship
Key Concepts What is land?
Key Concepts What is land?
o Baby, don’t hurt me, don’t hurt me no more.
Key Concepts What is land?
o Natural resources.
Key Concepts What is labor?
Key Concepts What is labor?
o Paid human work/effort.
Key Concepts What is capital?
Key Concepts What is capital?
o Manmade resources.
Key Concepts Physical capital Human capital
Key Concepts Physical capital
o Tools, machinery, factories Human capital
Key Concepts Physical capital
o Tools, machinery, factories Human capital
o Knowledge, skills, experience, education
Key Concepts Entrepreneur
Key Concepts Entrepreneur
o Risk-takero Person who makes the decisions about land, labor, and
capital to make products.
Key Concepts Hypothetical model of an economy that produces
two very different products, and shows us the opportunity cost of producing one product or another.
Key Concepts Hypothetical model of an economy that produces
two very different products, and shows us the opportunity cost of producing one product or another.o Production Possibilities Curve (PPC)
Key Concepts Underutilization
Key Concepts Underutilization
o Seen on a PPC, when an economy does not use all of the available resources to produce all the goods it can. Inefficient.
Key Concepts Efficiency on a PPC
Key Concepts Efficiency on a PPC
o Shown on the curve itself, any point along the curve is efficient. It is efficient because that economy is using all the resources possible to make products.
Key Concepts Impossibility on PPC
Key Concepts Impossibility on PPC
o Outside of the actual curve, a point of impossibilities occurs because there is no ability to reach that level of production given current resources.
Key Concepts What is the law of increasing opportunity costs?
Key Concepts What is the law of increasing opportunity costs?
o When we switch from one item of production to another, it costs us more and more to do so.
o Gives the PPC it’s actual curve shape. Resources are not perfectly adaptable, so it’s not a one-to-one exchange.
Moving from Point C to Point A, what is the opportunity cost of producing guns?
Moving from Point C to Point A, what is the opportunity cost of producing guns?o 20 butter.o We’re producing 100
guns, up from 25, for a gain of 75 guns.
o To do that, we have to give up making 20 butter.
Moving from Point A to Point B, what is the opportunity cost of producing butter?
Moving from Point A to Point B, what is the opportunity cost of producing butter?o 20 guns.o We’re producing 45
butter, up from 30, for a gain of 15 butter.
o To do that, we must give up 20 guns.
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