Limited Resources Unlimited Wants Production:

Is the process of making goods and

Economics products from raw materials.

Scarcity

Choices
Adam Smith (1723-1790)

What How To
For Whom
Produced Produce
To Produce
 Cost

s QS=QD

Long term
Short Term

Surplus: Shortage

QS > QD QS < QD
Fixed Variable
 Market Failure

Occurs due to an inefficient

allocation of resources in a free
market

Externalities:
occur when producing or consuming a
good cause an impact on third parties
not directly related to the transaction.
PPC

1. Many seller in the market

2. Many buyers in the market
3. Goods are homogenous.
4. Free entry and exit from the
market
5. Buyers and sellers are treated
equally
Economics Adam Smith