3. 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.
4. 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.
6. 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.
8. 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.
9. 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.
10. 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.
11. 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.
17. Economic Growth & Development Potential growth is achieved by changes in the quantity and/or quality of the factors of production Capital Goods 0 Consumer Goods
18. 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.