FUN - Fundamentals Overview
Fundamentals Overview
Introduction
Welcome to Economics! Economics is the study of how individuals or societies allocate scarce resources to meet their needs and wants. Producers use factors of production, land, labor, capital, and entrepreneurship to make goods and services that consumers want and need. Individuals, businesses, and nations experience opportunity costs and trade offs as they weigh costs and benefits in making choices and decisions. Specialization and trade allows for greater availability of goods and services to all of us.
Learning Objectives
In this module, students should be able to:
- Understand that scarcity is a basic, permanent condition that exists because unlimited wants exceed limited productive resources.
- Understand that all goods and services require the four factors of production – natural resources, human resources, physical capital, and entrepreneurship.
- Understand that the most desirable alternative you give up when you make a choice is known as your opportunity cost.
- Understand that you have made a rational decision when you make a choice where the marginal benefit is greater than the marginal cost.
- Understand that economic growth influences the standard of living of individuals and nations and can be illustrated on a graph known as the production possibilities curve.
Key Terms
The following key terms will help you understand the content in this module.
- Scarcity - a basic condition that exists when unlimited wants exceed limited productive resources
- Allocation – Distribution
- Productive Resources - factors of production that include land, labor, capital, entrepreneurship
- Land - natural resources
- Human resources - Labor and human capital
- Labor - all paid work done by a person
- Human Capital - a person’s knowledge and experience
- Physical Capital - anything made by a person that is used to produce a good or service
- Entrepreneur - business owner motivated to take risks by profit, job creation, innovation, and improving society
- Opportunity cost - the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices
- Marginal benefit - additional satisfaction
- Marginal cost - additional amount you pay
- Rational Decision - when your marginal benefit exceeds your marginal cost
- Positive incentive - a reward for doing something
- Negative incentive - a punishment encouraging you to do something
- Specialization - focusing on being good at one thing
- Production Possibilities Curve (PPC) - a graph that measures trade-offs, opportunity cost, growth, and efficiency
- Efficient - Not wasting resources
- Inefficient - Wasting resources
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