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40 Cards in this Set
- Front
- Back
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What is economics? |
Economics is the study of the choices people make to try to satisfy their wants in a world of scarcity. |
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What are resources? |
Resources are the factors of production of a business. They are needed to produce goods and services and are needed to satisfy wants and limit people. |
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What is scarcity? |
Scarcity is when a limited number of goods and services are available to meet unlimited wants. This requires us to make choices. |
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What is a need? |
A need is something that is essential to have. |
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What is a want? |
A want is something that you would like to have. It is not absolutely necessary, but it would be good to have. |
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What are the two kinds of wants? |
1. Tangible wants are anything that can be felt by touch (Physical objects). 2. Intangible wants are unable to be felt by touch (love, success). |
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What is the difference between goods and services? |
Goods are physical objects that someone produces while services are the actions or activities a person performs for another. |
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What is an opportunity cost and what is an example? |
An opportunity cost is the alternative that one has to give up when a choice is made. Everything we do has an opportunity cost. An example would be studying all night, which would require you to give up sleep. |
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What is a rationing device? |
A rationing device is a way to decide who gets what, such as money (you can get a parking spot for $300, or when you get enough votes to be homecoming queen or king). |
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What are costs and benefits? |
Costs are the negative aspects of a situation (the cons) and benefits are the positive aspects of a situation (the pros). In a good and correct decision, the benefits outweigh the costs. |
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What is a trade-off? |
A trade-off is a situation in which more of one thing means less of another (when you buy clothes, so you have less money for a car) |
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What are examples of intended and unintended effects when a store raises its prices? |
Intended: they make more money Unintended: they lose money through competition |
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Explain the concept: Global Economy |
A global economy is an economy in which actions anywhere in the world can affect everyone. An example would be if China had a revolution causing its reproduction rates to slow down, preventing it from being able to trade with the countries it usually does. |
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What is microeconomics? |
Microeconomics deals with behavior and choices as they relate to small units (a business firm, small market). |
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What is macroeconomics? |
Macroeconomics deals with the behavior and choices of an entire economy (taxes, gov. regulation). |
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What are the four types of resources? |
The four types of resources, or the factors of production for a business, are land, labor, capital, and entrepreneurship. |
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How does a nation decide what and how to produce? |
They decide with a production possibilities curve. |
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What is a production possibilities curve? |
A graph that shows alternative ways to use an economy's resources. It also determines the opportunity costs and trade-offs involved in making an economic decision. |
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What is a production possibilities frontier? |
The line on a production possibilities curve that shows the maximum possible output an economy can produce. |
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What is an Entrepreneur? |
Someone who has developed a new idea, started a business, or fueled economic growth. |
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What is a marginal cost? |
The cost of producing one more unit of a good. |
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What is marginal revenue (benefit)? |
The additional income from selling one more unit of a good. |
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What are the 4 types of resources and their payment? |
1. Land: natural resources (water, minerals, land, animals) Payment: rent 2. Labor: physical/mental tasks and talents that people contribute to production. Payment: wages 3. Capital: Human-made goods used for further production. MONEY IS NOT CONSIDERED CAPITAL! Payment: intrest 4. Entrepreneurship: Developing new ideas, making businesses and industries, and fueling economic growth. Payment: Profits |
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What are the three economic questions you ask of any economy? |
What goods will be produced? (to satisfy needs and wants of people) How will goods be produced? (to decide how to best use its resources) Who consumes these goods? (determined by how societies dist. income) |
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What is the difference between human capital and physical capital? |
Human capital is the knowledge and skills needed to make the business, while physical consists of the objects used to make the business and its products. |
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What are two things economists do to decide whether a decision is correct or not? |
They always consider the costs and the benefits of a decision. If it is correct, the benefits will outweigh the costs. |
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What is the invisible hand principle? |
A principle that states that if left alone, a market or economy will regulate itself. This means no government intervention. |
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What are the characteristics of a traditional economy? |
-Simplest and oldest -Based on custom and ritual -Relies on being self-sufficient -Restricts trades -Little innovation or change happens |
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What are the characteristics of free enterprise/capitalism? |
-Resources owned by private individuals -Gov.'s role is small -No economic plants -No income distribution -No gov. controlled prices - the market controls them -Incentive is profit |
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What is an example of a country that is heavily capitalist on the spectrum? |
Japan, America |
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What are characteristics of command/socialism? |
-All resources are owned by the government -Gov. role is HUGE in the economy -Economic plans are made by the government (quotas set by gov.) -Gov. distributes the income equally -Gov. controls prices -Incentive is the common good |
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What is an example of a modern day country that leans towards socialism on the spectrum? |
North Korea, Cuba |
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What is a mixed economy? |
An economy that is not purely capitalist or socialist Ex.: America has some gov. reg. provided: vital services, promotion of the general welfare EVERY ECONOMY IN THE WORLD IS ONE |
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What are the five features of capitalism? |
1. Individuals have a right to private property (owned by an individual/business) 2. Economic freedom - workers can choose where they work and who they work for 3. Voluntary exchange - individuals only have to make trades that make them feel they are better off 4. Competition is good 5. There are motivating economic incentives (money, profit) |
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Why is competition good from a worker's perspective? |
Workers get higher wages from competition. |
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Why is competition good from a consumer perspective? (4) |
1. Better prices 2. More selection 3. Improved quality 4. New products |
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What are the four roles of government in a capitalist economy? |
1. To protect property rights and contracts 2. To provide inexcludable public goods 3. Protect well being of consumers 4. To ensure producers provide consumers with information |
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What does the word externality mean? |
A side effect of an action that affects the well-being of a third party Can be negative (second-hand smoke) or positive (flu shot) |
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What are the profit and loss equations? |
Total revenue= price * quantity Total cost= Avg. cost * quantity Avg. cost= TC / quantity Profit/Loss= TR - TC; if + it is profit, if it is -, it is a loss |
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What is a free rider? |
A person who receives goods or services without paying for them. |
