Key concepts

• Economics is the study of how society decides what, how, and for whom to produce.
• economics involves choices under conditions of scarcity, meaning that resources are limited, and decisions must be made about their allocation.
• Scarcity of Resources: Goods and services are limited by the availability of resources (e.g., labor, machinery, land, raw materials, etc.). This creates a conflict between society's virtually limitless desires and the resources available.
• Scarce Resource: A resource is considered scarce if its demand at a zero price exceeds the available supply.
• Trade-offs: Every time a society makes choices, it faces trade-offs.
• The three fundamental trade-offs are:

  1. What goods and services to produce.
  2. How to produce them.
  3. For whom to produce them.
• Societies decide on what to produce and how much to produce based on prices
• when oil prices rise what might a society do?

  When oil prices rise sharply, this affects decisions across the economy:

  switching to alternative energy sources

  adjusting production methods to become more efficient.