The Basics of Economic Concepts and Structures

EPF.1a: How People Face Scarcity, Make Trade-offs, and Incur Opportunity Cost

Terms to Know:

Wants - the desire to possess or do (something); wish for.

Scarcity - the state of being scare or in short supply; shortage.

Resources - a stock or supply of something (money, materials, staff, or other assets) that can be drawn on by a person or organization in order to function effectively.

Trade-offs - a balance achieved between two desirable but incompatible features; a compromise.

Opportunity Costs - the loss of potential gain from other alternatives when one alternative is chosen.

EPF.1b: Choices and Unintended Consequences

Terms to Know:

Choice - an act of selecting or making a decision when faced with two or more possibilities

Decision - a conclusion or resolution reached after consideration

Consequence - a result or effect of an action or condition

Benefits - an advantage or profit gained from something

Costs - (of an object or an action) require the payment of (a specific sum of money or item that is given up) before it can be acquired or done

Cost-benefit Analysis - A process that analyzes business decisions and compares the benefits of a given situation while subtracting costs associated with taking that action.

EPF.1c: Comparing the Marginal Costs and Marginal Benefits to Make Effective Decisions

Terms to Know:

Marginal Cost - the cost added by producing one extra item of a product

Marginal Benefit - the additional stratification of utility that a person receives from consuming an additional unit of a good or service

Marginal Analysis - the examination of marginal benefits versus marginal costs

Diminishing Marginal Utility - a law of economics stating that as a person increases consumption of a product there is a decline in the marginal utility that the person derives from consuming each additional unit of that product.

EPF.1d: Identifying Factors of Production

Terms to Know:

Factors of Production - inputs that are used in the production of goods or services in the attempt to make an economic profit (land, labor, capital, and entrepreneurship)

Natural Resources - materials or substances such as minerals, forests water, and fertile land that occur in nature and can be used for economic gain

Human Resources - the personnel of a business or organization, especially when regarded as a significant asset

Capital Resources - tools, machines, and factories used to produce goods

EPF.1e: Comparing the Characteristics of Different Economies

Terms to Know:

Market Economy - economic system in which economic decisions and pricing of goods and services are guided solely by transactions done between citizens and businesses with little government involvement

Command Economy - an economy in which production, investment, prices, and incomes are determined centrally by the government

Traditional Economy - Rural, farm-based economy where citizens provide for themselves and exchange to obtain goods they could not obtain on their own

Mixed Economy -

EPF.1f: Adam Smith and The Characteristics of a Market Economy