Key Terms & Concepts

Places to Learn More:

• ThoughtCo -- Economics

• Investopedia

• MyMoney.gov

• Yahoo! Finance

• Wikipedia

*if you find additional solid sources, students, I may be inclined to give you a bonus point...

Economics is the study of how people try to satisfy unlimited and competing want through the careful use of relatively scarce resources.

Scarcity is a fundamental problem facing all societies. Scarcity is the condition that results from society not having enough resources to provide all the things people would like to have.

A need is a basic requirement for survival, such as food, clothing & shelter.

A want is simply something we would like to have but is not necessary for survival. For example, food is is needed for survival. Because many foods will satisfy the need for nourishment, the range of things represented by the term want is much broader than what would be considered a need.

There Is No Such Thing As A Free Lunch!

Because resources and limited, everything we do has a cost -- even when it seems as if we are getting something "for free". For example, do you really get a buy one get one free meal when you use a "buy one, get one free" coupon? The business that gives it away still has to pay for the resources that went into the meal, so it usually tries to recover these costs by charging more for its other products. In the end, you may actually be the one who pays for the "free" lunch!

Realistically, most things in life are not free, because someone has to pay for producing them in the first place. Hence, economists like to use the term TINSTAAFL, There Is No Such Thing As A Free Lunch.

Price is the amount of money that has to be paid to acquire a given product. Insofar as the amount people are prepared to pay for a product represents its value, price is also a measure of value.

A good is a commodity, or a physical, tangible item that satisfies some human want or need, or something that people find useful or desirable and make an effort to acquire it.

Services are both something easy and difficult to define. Service can be intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation. Sometimes services are difficult to identify because they are closely associated with a good; such as the combination of a diagnosis with the administration of a medicine. No transfer of possession or ownership takes place when services are sold, and they cannot be stored or transported, they are instantly perishable, and they come into existence at the time they are bought and consumed.

Broadly speaking, value refers to a worth than can often be expressed in dollars and cents. But it's not quite that simple. Value differs vastly, sometimes between geographic locations, people, uses, etc.

Value can be defined as the worth of all the benefits and rights arising from ownership. Two types of economic value are first, the utility of a good or service, and second the power of a good or service to command other goods, services, or money, in voluntary exchange.

Value is also the extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by customer's willingness to pay for it. It commonly depends more on the customer's perception of the worth of the product than on its intrinsic value.

For something to have value, it must also have utility (or the capacity to be useful and provide satisfaction). Utility is not something fixed or even easily measurable (like height or weight). Instead, the utility of a good or service may vary from one person to the next. One person may get a great deal of satisfaction from an iPad, another may get very little. One person might really love hitting up all the concerts around town, another may not.

A major contribution to economics & productivity comes from investments in human capital. Human Capital is the sum of people's skills, abilities, health, knowledge and motivation.

Government can invest in human capital by providing eduction and health care. Businesses can invest in training and other programs that improve the skills of their workers. Individuals can invest in their own education by completing high school, going to a technical school or attending college.

Sources:

• Economics, Principles & Practices -- Glencoe

• Basic Economics -- Thomas Sowell