market
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IntroductionKanako Nakagawa
Microeconomic
Microeconomic: the study of the behavior of individual markets
Scarcity
Scarcity: choices that has to be made. Exists because there are limited availability of economic resources relative to society’s unlimited demand for goods and services.
Factors of Production
Land: physical factor of production. Includes natural resources, which can be both renewable and non-renewable.
Labor: the human factor of production. Includes physical and mental contribution of the existing workforce of production.
Capital: the factor of production that is made by humans to produce goods and services. Occurs as a result of investment.
Entrepreneurship; factor of production involving the organization of other factors of production which includes risk-taking.
Opportunity Cost
Opportunity cost: the next best alternative foregone when an economic decision is made.
Free goods
Free goods: goods which are unlimited in supply and has no opportunity costs. Has unlimited supply at market price zero. Economic good: good or service that is relatively scarce
and has a price. Involves opportunity cost when it is consumed.
Utility
Utility: satisfaction or pleasure that an individual derives from the consumption of a good or service.
Production Possibilities Curve
PPC: shows the maximum combination of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and effectively.
Output
Actual output: the production of goods and services in an economy achieved in a given time period. Potential output: the possible production that would be
achieved in an economy if all available factors were employed.
Growth
Actual growth: occurs when previously unemployed factors of production are brought into use. Potential growth: occurs when the quantity and/or quality
of factors of production within an economy is increased. Economic growth: the growth of real output in an
economy over time.
Development
Economic development: a broad concept that involves improvement in standards of living, reduction in poverty, improved health and improved education. Sustainable development: economic development that
meets the needs of the present without compromising the ability of future generations to meet their needs.
Efficient PPC
A
All resources are used efficiently.
Good A
Good B0
Unefficient PPC
B
Good A
Good B
Resources aren’t efficiently used.
0
Economic Growth
B
Good A
Good B
C
Actual economic growth
0
Shift of Production
AGood A
Good B
B
Shift of production from Good A to Good B
0
Economic Development
A
Goods
Hospitals
B
Shift of production to public and merit goods
0
Economic Growth & Development
Capit
al G
oods
Consumer Goods
Potential growth is achieved by changes in the quantity and/or quality of the factors of production
0
Economy
Free market economy: an economy where the means of production are privately held by individuals and firms. Demand and supply determine what to produce, how to produce it and for whom to produce. A planned (command) economy: an economy where the
means of production are owned by the state. The state determines what to produce, how to produce it and for whom to produce.
Transition economy: and economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system.