Verified 2026/2027 Economics: Core Concepts and
Standards
Fundamental Economic Concepts
1. Explain why limited productive resources and unlimited wants result in scarcity,
opportunity costs and trade offs for individuals, businesses and governments.
a. Wants are unlimited, the total resources of a society including natural
resources, human resources, capital goods and entrepreneurship are
limited resulting in scarcity. All wants cannot be filled, trade-offs are
inevitable when deciding what to produce.
2. Define scarcity as a basic condition which exists when unlimited wants exceed
limited productive resources
a. Scarcity exists because human wants exceed the capacity of available
resources. This basic problem of scarcity is faced by all individuals,
organizations, businesses and governments.
3. Define and give examples of productive resources (Factors of Production) as land
(natural), labor (human), capital (capital goods), entrepreneurship
a. Land = natural resources;
b. Labor = people with their education, skills and abilities;
c. Capital = the goods and services used to make other consumer goods
and services;
d. Entrepreneurs = individuals who take the risk and combine the
productive resources (factors of production) to produce goods and
services and profit by selling these to consumers.
4. Identify strategies for allocating scarce resources
a. See Chart. The different strategies include, price, contests, force,
sharing, lottery, command, 1st come 1st served, personal characteristics.
5. Define opportunity cost as the next best alternative given up when individuals,
businesses and governments confront scarcity by making choices.
a. Opportunity cost is what you give up to obtain something else, one good
or service for another. Governments often have to decide on one good
or service at the expense of another. Trade-off is giving up one benefit
or advantage in order to gain another one that may be better.
,6. Provide examples of how rational decision making entails comparing the marginal
benefits and the marginal costs of an action.
a. We make choices to satisfy needs or to seek happiness! We look at the
options, compare costs, benefits, and the trade-offs involved with each
choice and reach a decision.
b. Marginal Cost = the additional cost of producing one more unit.
c. Marginal Benefit = the additional satisfaction or utility of consuming
one more unit.
7. Illustrate by means of a production possibilities curve the trade-offs between two
options
a. Production Possibilities Curve
A table or graph that shows the full employment capacity of an
economy in the form of possible combinations of two goods, or two
bundles of goods, that could be produced with a given amount of
productive resources and level of technology.
a. Moving from point B to C indicates that this society now prefers to build more
consumer goods and less capital goods. This is the trade-off when choosing a
different combination of goods
8. Explain that rational decisions occur when the marginal benefits of an action
equal or exceed the marginal costs.
a. Economic decisions are made on the basis of comparing marginal costs and
marginal benefits. There are not many all or none decisions. Almost all
decisions are marginal, we don’t typically make a decision between studying all
day or watching TV all day, we choose between studying a little more and
watching a little less TV or vice versa.
, 9. Explain how specialization and voluntary exchange between buyers and sellers
increase the satisfaction of both parties. Provide examples of how individuals and
businesses specialize
a. Division of Labor refers to the practice of dividing the work to make
something into separate tasks. Workers become specialized in different
tasks. We earn a living by doing tasks, taking our wages to purchase
goods and services from other workers. Division of Labor and
Specialization is the basis for an economy to exist. 3 benefits are doing
it better, no time required to switch tasks, create more effective ways to
do the task.
10. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
a. We don’t make all of our electronic devices, countries do not make all of
the goods and services they need. Specialization is the basis of trade and
interdependence among individuals, businesses, cities, regions and
countries. Wisconsin = dairy Florida = oranges.
11. Compare and contrast different economic systems, and explain how they answer
the three basic economic questions of what to produce, how to produce and for
whom to produce.
a. Every society must contend with the problem of scarcity. Every society,
regardless of its political structure, must develop an economic system to
determine how to use its limited productive resources to answer the three
basic economic questions.
What goods and services will be produced?
How will goods and services be produced?
Who will consume the goods and services?
The way a society answers these questions determines its economic system.
a. Three types of economic systems exist to answer these questions.
Traditional – In a traditional economy, economic decisions are based on
custom and historical precedent.
Command – In a centralized command economy, government planning
groups make the basic economic decisions. They determine such things as
which goods and services to produce, their prices, and wage rates.
Market – In a decentralized market economy, economic decisions are
guided by the changes in prices that occur as individual buyers and sellers
interact in the market place (which it is also referred to as a price system).
Other names for market systems are free enterprise, capitalism, and
Standards
Fundamental Economic Concepts
1. Explain why limited productive resources and unlimited wants result in scarcity,
opportunity costs and trade offs for individuals, businesses and governments.
a. Wants are unlimited, the total resources of a society including natural
resources, human resources, capital goods and entrepreneurship are
limited resulting in scarcity. All wants cannot be filled, trade-offs are
inevitable when deciding what to produce.
2. Define scarcity as a basic condition which exists when unlimited wants exceed
limited productive resources
a. Scarcity exists because human wants exceed the capacity of available
resources. This basic problem of scarcity is faced by all individuals,
organizations, businesses and governments.
3. Define and give examples of productive resources (Factors of Production) as land
(natural), labor (human), capital (capital goods), entrepreneurship
a. Land = natural resources;
b. Labor = people with their education, skills and abilities;
c. Capital = the goods and services used to make other consumer goods
and services;
d. Entrepreneurs = individuals who take the risk and combine the
productive resources (factors of production) to produce goods and
services and profit by selling these to consumers.
4. Identify strategies for allocating scarce resources
a. See Chart. The different strategies include, price, contests, force,
sharing, lottery, command, 1st come 1st served, personal characteristics.
5. Define opportunity cost as the next best alternative given up when individuals,
businesses and governments confront scarcity by making choices.
a. Opportunity cost is what you give up to obtain something else, one good
or service for another. Governments often have to decide on one good
or service at the expense of another. Trade-off is giving up one benefit
or advantage in order to gain another one that may be better.
,6. Provide examples of how rational decision making entails comparing the marginal
benefits and the marginal costs of an action.
a. We make choices to satisfy needs or to seek happiness! We look at the
options, compare costs, benefits, and the trade-offs involved with each
choice and reach a decision.
b. Marginal Cost = the additional cost of producing one more unit.
c. Marginal Benefit = the additional satisfaction or utility of consuming
one more unit.
7. Illustrate by means of a production possibilities curve the trade-offs between two
options
a. Production Possibilities Curve
A table or graph that shows the full employment capacity of an
economy in the form of possible combinations of two goods, or two
bundles of goods, that could be produced with a given amount of
productive resources and level of technology.
a. Moving from point B to C indicates that this society now prefers to build more
consumer goods and less capital goods. This is the trade-off when choosing a
different combination of goods
8. Explain that rational decisions occur when the marginal benefits of an action
equal or exceed the marginal costs.
a. Economic decisions are made on the basis of comparing marginal costs and
marginal benefits. There are not many all or none decisions. Almost all
decisions are marginal, we don’t typically make a decision between studying all
day or watching TV all day, we choose between studying a little more and
watching a little less TV or vice versa.
, 9. Explain how specialization and voluntary exchange between buyers and sellers
increase the satisfaction of both parties. Provide examples of how individuals and
businesses specialize
a. Division of Labor refers to the practice of dividing the work to make
something into separate tasks. Workers become specialized in different
tasks. We earn a living by doing tasks, taking our wages to purchase
goods and services from other workers. Division of Labor and
Specialization is the basis for an economy to exist. 3 benefits are doing
it better, no time required to switch tasks, create more effective ways to
do the task.
10. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
a. We don’t make all of our electronic devices, countries do not make all of
the goods and services they need. Specialization is the basis of trade and
interdependence among individuals, businesses, cities, regions and
countries. Wisconsin = dairy Florida = oranges.
11. Compare and contrast different economic systems, and explain how they answer
the three basic economic questions of what to produce, how to produce and for
whom to produce.
a. Every society must contend with the problem of scarcity. Every society,
regardless of its political structure, must develop an economic system to
determine how to use its limited productive resources to answer the three
basic economic questions.
What goods and services will be produced?
How will goods and services be produced?
Who will consume the goods and services?
The way a society answers these questions determines its economic system.
a. Three types of economic systems exist to answer these questions.
Traditional – In a traditional economy, economic decisions are based on
custom and historical precedent.
Command – In a centralized command economy, government planning
groups make the basic economic decisions. They determine such things as
which goods and services to produce, their prices, and wage rates.
Market – In a decentralized market economy, economic decisions are
guided by the changes in prices that occur as individual buyers and sellers
interact in the market place (which it is also referred to as a price system).
Other names for market systems are free enterprise, capitalism, and
