Chapter 1: Key Terms
Scarcity means there is a limited amount of resources in society
o Ex. Oil, it will eventually run out.
Economics is study how to manage the way we handle the amount of limited
o Ex. Firms (business). My dad’s restaurant. We decide how much product
we will buy such as chicken beef and pork and how much products we use
to produce food for the customers. Since chicken is not an unlimited
supply, and chicken is more popular than beef then we have to be smart
where to use the chicken and how much chicken to buy. In other words we
take a certain amount of chicken for cooking orders, for chicken balls,
general chicken etc. to satisfy each of the demand.
o Ex 2. You having $200 for a week for food. You can either spend it on
food for a full week or spend it on food on one night at a restaurant. Since
that $200 is scarce it is wiser to spend it at a super market for food for the
Opportunity Cost something you give up to OBTAIN something else.
o Ex. buying an iPhone that you need or wait 2 weeks for the iPhone 5.
Tradeoff giving up something you like to BENEFIT something else you like.
o Ex. Not going to the party which you want and spending more time on
studying which is crucial for a good passing grade. The tradeoff in this
situation is your not having fun and your devoting your time towards
preparing for your upcoming test.
o Ex. Buying a car. You choose two cars you like but you can only buy one.
The BMW consumes m