Economic Concepts Worksheet

Concept Application of Concept from Personal Experience Reference to Concept in Reading
Scarcity and Choice, condition of limited resources and unlimited wants and needs, consumers need to evaluate multiple options and select from them. Goods and services are scarce because of the limited availability of resources along with the limits on our technology and skillful people relative to the total amount desired. If somehow people desired nothing, there would be no scarcity. If resources were great enough to produce more than anyone desired, there would also be no scarcity Consumers have to make choices between different options because the resources necessary to fulfill their wants are limited, this happens all over the world. These decisions are made by giving up (trading-off) one want to satisfy another. When I was a child in the 80’s there was sugar and rice scarcity because employees at the manufacturing companies in the Coast of Peru where on strike then grocery stores sold the products at 1 pound per person. “Since human and property resources are scarce (limited), it follows that the goods and services we produce must also be limited. Scarcity limits our options and necessitates that we make choices. Because we “can’t have it all,” we must decide what we will have and what we must forgo” (McConnell−Brue, 2004, p. 3).
Microeconomics, is a branch of economics that studies how individuals, households, and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold. When you are at the beach, you see the amount of sand and the amount of shells and rocks; this is a classic example to differentiate macroeconomics and microeconomics. The shells and the rocks are microeconomics. “In microeconomics we talk of an individual industry, firm, or household. We measure the price of a specific product, the number of workers employed by a single firm, the revenue or income of a particular firm or household, or the expenditures of a specific firm, government entity, or family” (McConnell−Brue, 2004, p. 10).
Macroeconomics, examines the economy as a whole; involves the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national economic policies. Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy. “Macroeconomics permits us to examine the forest rather than the trees so we can ascertain the more general patterns of an economy. It is, in effect, a bird's eye view rather than a worm's eye view.” (The Free Library, 2000)
Factors of production, all natural, human, and manufactured resources that go into the production of goods and services, four specific categories are land, capital, labor and entrepreneurial ability To produce a car we need labor as engineers, designers, paint sprayers, testers, we need land for the plant and the equipment, we need capital as tools, technology, machinery and we need entrepreneurship as managers who are the risk takers. “Entrepreneurs are people who organize productive resources to make goods and services. The economists regard entrepreneurs as a specialist form of labor input. The success and/or failure of a business often depend on the quality of entrepreneurship. (“The Free Library, 2000”)

Opportunity cost, the amount of other products that must be forgone or sacrificed to obtain 1unit of a specific good. A company spent money buying new computers and having an anniversary party, the company can not spend the money buying a new delivery van or a new fax. The opportunity cost is the money spent plus the pleasure you forgo by not buying the van and the new fax. “If the land is used for logging and mining, the opportunity cost is the forgone benefits of wilderness. If the land is used for wilderness, the opportunity cost is the lost value of the wood and minerals that society forgoes” (McConnell−Brue, 2004, p. 32).