Alternative Uses Of Scarce Resources Opportunity Cost example essay topic

Utility: satisfaction derived from consuming a good. Profit: Profit = TR - TC = Q (AR-AC). Normal Profit: profit that the firm could make by using its resources in their next best use (opportunity cost) Supernormal profit: profit above normal profit. Welfare maximization: Adaptive Expectations: where decisions are based upon past information. Rational Expectations: where decisions are based on current information and anticipated future events.

Rational economic behavior: Positive: scientific or objective study of the allocation of resources Normative: study and presentation of policy prescriptions involving value judgements about the way in which scarce resources are allocated. (subjective approach to economics) Free Good: goods which are unlimited in supply and which therefore have no opportunity cost. Economic Good: goods which are scarce because their use has an opportunity cost. Scarcity: economic agents (firms, governments, ... ) can only obtain a limited amount of resources at any moment in time. Choice: economic choices involve the alternative uses of scarce resources Opportunity cost: economic cost of production, benefit lost from the next best alternative. Production possibility frontier: curve which shows the maximum potential level of output of one good given a level of output for all other goods in the economy. Short Run: period of time when at least one factor input cannot be varied.

Long Run: period of time when all factor inputs can be varied, but the state of tech. remains constant. Very Long Run: the period of time when the state of technology may change. Factors of Production: Land: all natural resources Labor: workforce Capital: manufactured stock of tools, machines, factories, offices, roads and other resources used in the production of goods and services. Enterpreneurship: those who organize production, and take risks.

Market: occurs whenever buyers and sellers are in contact with each other. Ceteris Paribus 'all other things remaining the same', the assumption that all other variables within an economic model remain constant whilst one change is being considered. Externalities: Merit Good: good which is under-provided by the market mechanism. // has positive externalities. Public Good: good where consumption by one person does not reduce the amount available for consumption by another person, (non-excluding / non-rivalrous) leads to the concept of the free rider. i.e. : defense, streetlights. Private Good: Goods which are excludable, rivalrous. Centrally Planned Economy: economic system where the government, through a planning process, allocates resources in society.

Free Market Economy: economic system which resolves the basic economic problem through the market mechanism. Normal Good: good where demand increases when income increases (YED 0) Inferior Good: good where demand falls when income increases (YED.