Econ Unit 1 Study Guide

economics

a study of how people, businesses, governments, and societies choose to use limited resources to satisfy unlimited wants and needs

micro

focuses on individuals and businesses

macro

focuses on the economy as a whole

scarcity

resources are limited; wants are unlimited

why scarcity forces choices

people always want more goods

trade-off

choosing one things means giving up something

opportunity cost

the next best alternative you give up when making a choice

marginal benefit

the extra gain from one more unit

marginal cost

the extra sacrifice from one more unit

land

natural resources

labor

human effort, physical and mental work of people

capital

tools and skills used in production

entrepreneurship

innovation and risk taking

traditional economy

• based on customs and traditions

• roles and jobs passed down through generations

• little innovation or change

command economy

• government makes all major decisions

• sets prices, wages, and production goals

• equality often emphasized but efficiency suffers

market economy

• decisions made by individuals and businesses

• driver by supply, demand, profit, and motive

• encourages innovation and efficiency

mixed economy

• combination of market and government involvement

• government provides rules, protections, safety nets

• most modern economies are mixed

monetary incentive

rewards or penalties that include money or things with clear monetary value

non-monetary incentive

rewards or penalties not measured directly in money

specilizations

when an individual, company, or country focuses all its labor, skills, and resources on producing a limited range of goods or services

how specialization can increase productivity

allowing workers or businesses to focus on a narrow set of tasks