Chapter 1 Scarcity Fundamental Concept of economics that indicates that there is less of a good freely available from nature than people would like Resource An input used to produce economic goods land labor skills natural resources and human made tools are examples Capital Human made resources such as tools equipment and structures used to produce other goods and services Objective a fact based on observable phenomena that is not influenced by differences in personal opinion Subjective An opinion based on personal preferences and valued judgments Economic Behavior Choosing the option that offers the greatest benefit at the least possible cost Utility The subjective benefit of satisfaction a person expects rom from a choice or course of action Chapter 2 Transaction Cost The time effort and other resources needed to search out negotiate and complete on exchange Production possibility Curve The Curve can be shifted by Investment Technological Advances Improved Institutions Greater Work Efforts Creative Destruction The replacement of old production methods by innovated new ones that consumers judge to be superior Key Points 1 The highest valued activity sacrificed when a choice is made is known as opportunity cost explains human behaviors 2 Mutual Gain is the foundation of trade 3 Transaction Cost Middle Men reduce the costs Chapter 3 Law of Demand Law of Demand A principle that states there is an inverse relationship between the price of a good and the quantity of it buyers are willing to purchase As the price of a good goes up Consumer purchases will go down A shift of the curve will occur to the left with a decrease in demand and will shift to the right with an increase in income
View Full Document
Unlocking...