Basic economic concept

Scarcity¶

Scarcity: limited resource $\leftrightarrow$ unlimited wants

Resource: factors of production = input

• Land
• Labor
• Capital
• Entrepreneurship

Economy Forms¶

Property rights and protection of private property

• Market Economy
• Command Economy

Opportunity Cost¶

$OC = \dfrac{quantity\ of\ goods\ or\ services\ forgone}{quantity\ of\ goods\ or\ services\ gain}$

$OC_x = \dfrac1{OC_y}$

PPF Shift¶

Rightward shifters of PPF

• Increment in resource quantity / quality
• Improvement in productivity
• Improvement in technology

The Principle of Increasing Opportunity Cost¶

OC increases because resources aren't equally adaptable

Advantage¶

• Absolute Advantage: can produce goods and services in greater quantity for the same cost / less production cost
• Comparative Advantage: produce goods and services at a lower Opportunity Cost

Principle of Diminishing Marginal Utility¶

Utility Maximizing Rule:

$\dfrac{MU_1}{Price_1} = \dfrac{MU_2}{Price_2}$

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