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| inputs people use to produce goods and services |
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| when there is less of a good freely available from nature than we would like |
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| "eight guideposts to economic thinking" |
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Definition
| trade-offs, economizing behavior, incentives, individuals make decisions at the margins; although information can help us make better choices, its acquisition is expensive; beware of secondary effects; the value of a good or service is subjective; the test of a theory is its ability to predict--which is why it aims at large groups, rather than individuals |
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| when people try to get the most of their resources |
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| the benefit or satisfaction that an individual expects to derive from a specific economic choice |
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| additional (marginal) cost of producing one more unit; there is a difference between marginal benefit and total benefit. |
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| sometimes the secondary effects are the ones that are desired |
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| there are non-monetary and monetary costs. |
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channeling goods and resources to those who value most, increases wealth created by society's resources.
but transactions cost: time, effort, other resources in searching, negotiating, consummating an exchange.
middleman reduces transaction costs; so does Internet. |
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Term
| private property rights incentives |
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Definition
-can gain by helping some people; ignoring wishes of others is an opportunity cost.
-strong incentive to care for and properly manage what they own.
-incentive to conserve for the future, esp. if increased value is expected.
-incentive to not cause damage to property of others. |
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| breaking large task into smaller ones done by all people |
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| reasons for why div. of labor increases output. |
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Definition
1. specialization: individuals can take adv. of existing skills.
2. specialized workers become more skilled over time.
3. lets mass production tech. work |
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| total output of group of individuals, economy, or group of nations will be greatest when the output of each good is produced by the person with lowest opp. cost of producing that good. |
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| protection against invasion by others. private property can be transferred, sold, or mortgages at owner's discretion. |
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Term
| economic pie-does it change? how does it change? how can it grow? |
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Definition
changes in size based on the actions of its people.
output can expand through investment and the discovery of better ways of doing things.
changes based on availability of resources, technology, institutions, and human effort |
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| decentralized decisions of private property owners resolve economic problems--aka capitalism! |
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| gov't owns income-producing assets and directly determins what goods they produce |
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