Micro 2

Front 1

Scarcity

Back 1

Is the most basic concept in all of economics
Occurs when the ingredients for producing things that people desire are insufficient to satisfy all wants
Means we never have enough of everything, including time, to satisfy our every desire

Front 2

Our economy is a system to allocate ________.

Back 2

scarce resources

Front 3

What scarcity is NOT

Back 3

It is not a shortage.
It is not the same thing as poverty.

Front 4

Production

Back 4

Any activity that results in the conversion of resources into products that can be used in consumption

Front 5

Resources or Factors of Production

Back 5

Inputs that are used to produce things that people want

Front 6

Land

Back 6

Natural resources or the gifts of nature, e.g. water, minerals, etc.

Front 7

Labor

Back 7

The human resource
We sell the time we use our brawn or brain to assist in the production process

Front 8

Physical Capital

Back 8

All manufactured resources
Defined as plant, property, and equipment that businesses use to produce goods and services

Front 9

Human Capital

Back 9

Accumulated training and education of workers
This recognizes that the labor resource can be qualitatively improved

Front 10

Entrepreneurship

Back 10

Person who organizes, manages, and assembles the other resources
Maker of basic business policy decisions
Risk taker

Front 11

Goods versus Economic Goods

Back 11

Goods are all things from which individuals derive satisfaction or happiness.
Economic goods are scarce goods, for which the quantity demanded exceeds the quantity supplied at zero price.

Front 12

Services

Back 12

Tasks that are performed for someone else
Can be referred to as intangible goods

Front 13

Scarcity

Back 13

occurs when the ingredients (resources) for producing things that people desire are insufficient to satisfy all wants.

Front 14

Shortages

Back 14

occur when the quantity demanded exceeds the quantity supplied

Front 15

Needs

Back 15

To economists, the term need is not definable

Front 16

Wants

Back 16

Goods and services on which we place a positive value
People have unlimited wants

Front 17

Opportunity Cost

Back 17

The highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want

Front 18

In economics, ____ is always a forgone opportunity (to benefit).

Back 18

cost

Front 19

Whenever you engage in any activity, using any resource, you are ____ the use of that resource for one or more alternative uses.

Back 19

trading off

Front 20

Opportunity cost graphically

Back 20

The production possibilities curve (PPC) represents all possible maximum combinations of total output that could be produced.
Along the production possibilities curve, there is a fixed quantity of productive resources of a given quality being used efficiently.

Front 21

PPC is used to demonstrate related concepts of ____, ____, and _____.

Back 21

scarcity, choice, and trade-offs

Front 22

Production possibilities assumptions

Back 22

Resources are fully employed
Production takes place over a specific time period
Resources are fixed for the time period
Technology does not change over the time period

Front 23

PPC is used to demonstrate related concepts of ____, ____, and _____.

Back 23

scarcity, choice, and trade-offs

Front 24

Technology

Back 24

Society’s pool of applied knowledge concerning how goods and services can be produced

Front 25

Production possibilities assumptions

Back 25

Resources are fully employed
Production takes place over a specific time period
Resources are fixed for the time period
Technology does not change over the time period

Front 26

Efficiency

Back 26

The case in which a given level of inputs is used to produce the maximum output possible
Alternatively, the situation in which a given output is produced at minimum cost

Front 27

Technology

Back 27

Society’s pool of applied knowledge concerning how goods and services can be produced

Front 28

Unattainable point

Back 28

Given the limiting assumptions, can not exist

Front 29

Efficiency

Back 29

The case in which a given level of inputs is used to produce the maximum output possible
Alternatively, the situation in which a given output is produced at minimum cost

Front 30

Inefficient Point

Back 30

Any point below the production possibilities curve at which the use of resources is not generating the maximum possible output

Front 31

Unattainable point

Back 31

Given the limiting assumptions, can not exist

Front 32

Law of Increasing Relative Cost

Back 32

As society attempts to produce more of a good, the opportunity cost of additional units of that good generally increases
Accounts for bowed shape of the PPC

Front 33

Inefficient Point

Back 33

Any point below the production possibilities curve at which the use of resources is not generating the maximum possible output

Front 34

In general, the more specialized the resources, the more ____ the PPC

Back 34

bowed

Front 35

Law of Increasing Relative Cost

Back 35

As society attempts to produce more of a good, the opportunity cost of additional units of that good generally increases
Accounts for bowed shape of the PPC

Front 36

Economic growth

Back 36

Increases the production possibilities of digital cameras and pocket PCs
Occurs over a period of time
Is illustrated by an outward shift of the production possibilities curve

Front 37

In general, the more specialized the resources, the more ____ the PPC

Back 37

bowed

Front 38

PPC

Back 38

Can be used to illustrate the trade-off between present and future consumption

Front 39

Economic growth

Back 39

Increases the production possibilities of digital cameras and pocket PCs
Occurs over a period of time
Is illustrated by an outward shift of the production possibilities curve

Front 40

PPC

Back 40

Can be used to illustrate the trade-off between present and future consumption

Front 41

Consumption

Back 41

The use of goods and services for personal satisfaction

Front 42

Consumer goods

Back 42

Goods produced for personal satisfaction

Front 43

Capital goods

Back 43

Goods used to produce other goods

Front 44

Capital Goods and Growth: Observations

Back 44

Forgo consumption goods to produce capital goods
Increase in capital goods stimulates economic growth

Front 45

Specialization

Back 45

Organization of economic activity among different individuals and regions
Leads to greater productivity

Front 46

Division of Labor

Back 46

Rational individuals choose their comparative advantage and specialize.
Specialization leads to division of labor.
Adam Smith, in The Wealth of Nations, illustrated division of labor in pin making.

Front 47

Assigning different workers different tasks to produce a good or service

Back 47

Division of Labor

Front 48

The problem of scarcity, even for the affluent

Back 48

Scarcity and poverty are not synonymous

Front 49

Why economists consider individuals’ wants but not their needs

Back 49

Needs are not objectively definable.
Wants are things on which we place a positive value.

Front 50

Why the scarcity problem leads people to evaluate opportunity costs

Back 50

Allocating resources to producing one good means losing the opportunity to have another one.

Front 51

Why getting more units of one good requires giving up more and more of another

Back 51

Resources are specialized

Front 52

There is a trade-off between consumption goods and capital goods

Back 52

As more resources are devoted to the production of capital goods, we can expect the rate of economic growth to increase.

Front 53

Absolute versus comparative advantage

Back 53

One finds one’s absolute advantage by producing more of a specific good than someone else who uses the same amount of resources.
One finds one’s comparative advantage by looking at the activity that has the lowest opportunity cost.