Economics Study Guide.

Scarcity
condition that results from society not having enough resources to produce all the things people would like to have
Need
a basic requirement for survival
Want
something we would like to have but not necessary for survival
Land
factor of production that includes natural resources not created by humans. “Gifts of Nature”
Capital
Factor of production that includes tools, equipment, machinery, and factories used in the production of goods and services. MONEY IS ALSO A CAPITAL GOOD B/C IT IS ESSENTIAL FOR BUSINESS TO GET OTHER RESOURCES LIKE EQUIPMENT.
Gross Domestic Product
dollar value of all final goods, services, and structures produced within a country’s borders in a 12-month period
Entrepreneurs
factor of production that involves risk takers in search of profits
Labor
People with all their efforts, abilities and skills
What are the three basic economic Questions?
WHAT, HOW & FOR WHOM to produce
What is the fundamental problem of economics?
scarcity
What are the four factors of production?
Land, labor, capital, entrepreneurs
An example of a capital good?
A computer in a school that is used for education
The study of economics includes:
description, analysis, and prediction
What is description?
Allows us to know what the world looks like.
What is Analysis?
It helps us discover why things work and how things happen.
What is Prediction?
Econ. is the study of both what is happening and what tends to happen, it can help PREDICT what may happen in the future including the most likely effects on different actions.
What is economics?
Social science dealing with the study of how people satisfy seemly unlimited & competing wants with the careful use of scarce resources
The study of economics helps us …….
The study of econ. helps us become more informed citizens and better decision makers b/c of this, it is important to realize that good econ. choices are the responsibility of all citizen in a free and democratic society.
Good
A tangible item that is economically useful or satisfies and economic want
Service
Work that is performed for someone
Market
Location or other mechanism that allows buyers and sellers to exchange a specific economic product
Productivity
A measure of the amount of output produced with a given amount of resources in a specific period of time
Human Capital
The sum of the skills, abilities, health, knowledge, and motivation of people
For something to have value, it must
have Utility
What is an example of a Service?
a haircut
Which is an example of a good?
a car
Specialization refers to ….
performing one task relatively more efficiently than another
What is Economic Interdependence?
People’s reliance on each other to provide goods and services
Capital goods
manufactured goods that are used to produced other goods & services
Consumer goods
Goods intended for final use by individuals
Durable good
Any good that lasts three years or more when used on a regular basis. IT includes both capital goods such a robot welders and consumer goods such as automobiles.
Non-durable goods
An item that lats for fewer than three years when used on regular basis. Ex: Food, writing paper. and most clothing items.
What is the difference between a good and a service?
A good is tangible, or something that can be touched, while a service is not.
Value
Refers to a worth that can be expressed in dollars and cents.For something to have monetary value, economists decided, it must be scarce and have utility. THis is the solution of the paradox value
Paradox of value
Apparent contradiction between the high monetary value of a nonessential item and the low value of an essential item
Consumer
The people who use goods and services to satisfy their wants and needs.
Wealth
the accumulation of products that are tangible, scarce, useful, and transferable from one person to another
Factor Markets
market where the factors of productions are bought and sold
Product Markets
Market where goods and services are bought and sold
Economic Growth
The increase in a nation’s total output of goods and services over time. This means that the circular flow becomes larger, with more factors of production, goods, and services: flowing in one direction and more payments in the opposite direction
What is the most important factor contributing to Economic growth
Productivity
Productivity
A measure of the amount of goods and services produced with a given amount of resources in a specific period of time. Scarce resources being used efficiently
Division of labor
division of labor into a # of separate tasks to be performed by different workers
Specialization
Assignment of tasks to the workers, factories, regions, or nations that can perform them more efficiently
Economic Interdependence
mutual dependency of one person’s, firm’s, or region’s economic activities on another’s
standard of living
quality of life based on the possession of the necessities and luxuries that make life easier
production possibilities frontier
diagram representing various combinations of goods and/or services that an economy can produce when all productive resources are fully employed
free enterprise economy
economy in which consumers and privately owned businesses make the majority of the WHAT, HOW, and FOR WHOM decisions
opportunity cost
cost of the next-best alternative use of money, time, or resources when one choice is made rather than another
trade-offs
alternative choices made by consumers in the marketplace
wealth
sum of those economic products that are tangible, scarce, useful, and transferable
Which of the following best describes the relationship between trade-offs and opportunity costs?
Opportunity costs are incurred when trade-offs are made
Imagine you decide to purchase a soccer ball for $35. Which is a opportunity cost?
Something else that could have been bought
The production possibilities frontier …
illustrates the concept of opportunity costs
The study of economics helps people to
become better decision-makers
Make wise choices for political candidate
understand the free enterprise system
When analyzing economic behavior, it helps to
use simple models