This document defines key microeconomic concepts such as scarcity, factors of production, opportunity cost, utility, production possibilities curves, and economic growth and development. It explains that microeconomics is the study of individual markets and how scarcity exists because demand for goods and services exceeds limited resources. The factors of production are defined as land, labor, capital and entrepreneurship. Opportunity cost refers to the next best alternative forgone when making an economic decision.

1. Introduction Kanako Nakagawa

2. Microeconomic Microeconomic: the study of the behavior of individual markets

3. Scarcity Scarcity: choices that has to be made. Exists because there are limited availability of economic resources relative to society’s unlimited demand for goods and services.

4. Factors of Production Land: physical factor of production. Includes natural resources, which can be both renewable and non-renewable. Labor: the human factor of production. Includes physical and mental contribution of the existing workforce of production. Capital: the factor of production that is made by humans to produce goods and services. Occurs as a result of investment. Entrepreneurship; factor of production involving the organization of other factors of production which includes risk-taking.

5. Opportunity Cost Opportunity cost: the next best alternative foregone when an economic decision is made.

6. Free goods Free goods: goods which are unlimited in supply and has no opportunity costs. Has unlimited supply at market price zero. Economic good: good or service that is relatively scarce and has a price. Involves opportunity cost when it is consumed.

7. Utility Utility: satisfaction or pleasure that an individual derives from the consumption of a good or service.

8. Production Possibilities Curve PPC: shows the maximum combination of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and effectively.

9. Output Actual output: the production of goods and services in an economy achieved in a given time period. Potential output: the possible production that would be achieved in an economy if all available factors were employed.

10. Growth Actual growth: occurs when previously unemployed factors of production are brought into use. Potential growth: occurs when the quantity and/or quality of factors of production within an economy is increased. Economic growth: the growth of real output in an economy over time.

11. Development Economic development: a broad concept that involves improvement in standards of living, reduction in poverty, improved health and improved education. Sustainable development: economic development that meets the needs of the present without compromising the ability of future generations to meet their needs.

12. Efficient PPC Good A All resources are used efficiently. A 0 Good B

13. Unefficient PPC Good A Resources aren’t efficiently used. B 0 Good B

14. Economic Growth Good A Actual economic growth C B 0 Good B

15. Shift of Production Good A Shift of production from Good A to Good B A B 0 Good B

16. Economic Development Shift of production to public and merit goods Goods A B 0 Hospitals

17. Economic Growth & Development Potential growth is achieved by changes in the quantity and/or quality of the factors of production Capital Goods 0 Consumer Goods

18. Economy Free market economy: an economy where the means of production are privately held by individuals and firms. Demand and supply determine what to produce, how to produce it and for whom to produce. A planned (command) economy: an economy where the means of production are owned by the state. The state determines what to produce, how to produce it and for whom to produce. Transition economy: and economy in the process of moving from a centrally planned economic system towards a more market-oriented economic system.