Economics Concepts

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Opportunity Costs

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The loss of potential gain from other alternatives when one alternative is chosen.

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Law of Diminishing Marginal Returns

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As more of a variable input is added to a fixed input, the additional output produced from each additional unit of input eventually decreases.

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Specialization

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The process of concentrating on and becoming expert in a particular subject or skill.

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Utility

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A measure of satisfaction or benefit derived from consuming goods and services.

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Land, Labor and Capital

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The three factors of production used to create goods and services.

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Relationship between Productivity and Costs

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As productivity increases, the cost per unit of output typically decreases.

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Voluntary Exchange

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A transaction where both parties agree to trade goods or services freely.

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Scarcity Forces Trade Offs

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Limited resources require individuals and societies to make choices and trade-offs.

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Costs vs. Benefits

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The comparison of the costs and benefits of a decision to determine the best course of action.

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Thinking at the Margin

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Making decisions based on small changes in resources or consumption.