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16 Cards in this Set

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Economics
The study of the allocation of the scarce means of production toward that satisfactions of human wants.
Scarce means of production
land, labor, capitol and entrepreneurial ability
also called resources
land
Land is made valuable because of its location and scarcity. The amount of land is limited, so it goes to the highest bidder. Since there is a finite amount of land, the most desirable land is relatively scarce.
labor
all paid work is labor. Only a certain number of people are physically, mentally, and emotionally capable of doing the work that needs to done. The more you have to pay for it the scarcer it is.
capitol
All the plant and equipment used to turn out the goods and services that are produced. Depending on what your business you might need more than others, ie, an airline businees or an assembly plant.
entrepreneurial ability
the ability to combine land, labor, and capitol in a way that will make money.
also called management ability
opportunity cost
Because of scarcity we have to make choices, the second choice or what you give up is the opportuntiy cost.
choosing between braces or a vacation and the result of that.
"The Invinsible Hand"
when people set out to promote the public interest, they would do less good than they would if they pursued their own selfish interest - the profit motive
term coined by Adam Smith's The Wealth of Nations
price mechanism
everyone and everything has a price.
when prices go up buyers have to choose to do without or pay OR buyers can buy more of something driving prices up signaling to producers to make more.
competition
Many firms in an indusstry, so that no firm is large enough to have influence over price.
command economy
the government produces almost all goods and services
China and Cuba are examples
pure capitalism
private enterprise produces virtually all goods and services
mixed economy
some government production and some private industry production of goods and services
US is an example, however about 90% of production is from industry
governments power over economy
It can tax, it can spend, and it can regulate
Production influenced by child labor laws-Some supplies produced in response to government need (roads, missial systems) - taxes are redistributed to government sponsored programs
principle of comparative advantage
The total output is greatest when each product is made by that country that has the lowest opportunity cost
Gross Domestic Product
a nation's expenditure on all the goods and serivces produced during the year at market prices.
GDP