Mr Lee. Chapter 1 flashcards, test on 02/13/24 (copy)

What is Economics?

Economics is the study of how people try to satisfy unlimited wants through careful use of scarce resources. It’s also a social science sit it deals with behavior of people as they deal with unlimited wants but limited resources.

What are needs?

Basic requirements for survival

Examples of basic requirements

Food, clothing, shelter

What are wants?

Wants are something we would like to have but not necessary for survival

Examples of wants

Wifi, car, phone

What are goods?

Goods are useful, tangible items that can be use to satisfy a need or want.

Examples of goods

Book, Car, Phone

What are the four types of goods?

Durable goods, Non durable goods, Consumer goods, and Capital goods

What are Durable goods?

Lasts 3 years or more when used on a regular basis

What are non durable goods?

Item that lasts for fewer than 3 years when used on a regular basis

What are consumer goods?

Good intended for final use by consumer.

What are Capital goods?

Good intended for final use by business.

Example of Durable good

Tools, Tractor, goods

Example of Non durable good

Food, clothes, paper

Example of Consumer good

Shoes, shirt, car

Example of Capital good

Machinery, tools, equipment

What are services?

Work performed for someone

Example of Services

Haircuts, home repairs, entertainers, doctors, lawyers, teachers

What does “Value” refer to?

Worth that can be expressed in cents and dollars

Who coined the term “Paradox of Value”?

Adam Smith, in 1776

What can NOT determine value alone?

Scarcity

What is value determined by?

Utility

What is utility?

The ability, to be useful or provide satisfaction. It cannot be measured and varies from person to person.

What is wealth?

Accumulation of products that are tangible, scarce, have utility, and are transferable

Examples of wealth?

Natural resources, Factories, stores, houses, motels, theatres

What are intangible items?

Services that are still valuable and useful

Examples of intangible items

Ability and skills of a a Nations people is a source wealth

If a country loses it’s tangible goods, they can recover through what?

Intangible skills. However if a country were to lose it’s intangible skills they would not be able to recover.

What is “TINSTAAFL”?

There is no such thing as a free lunch.

What is ‘TINSTAAFD”

There is no such thing as a free drink.

How do BOGO (Buy one get one free) coups recoup?

By charging for other things. An example of this would be having to a drink.

Who gets to decide over whats produced and why?

The people or Government. Because resources are scarce

Who gets to choose for whom to produce?

Society has to decide who will get these things that are produced

What does description mean?

Describes economic activity

What does GDP stand for?

Gross Domestic Product

Wat is GDP?

Monetary value of all final goods , services, and structures produced in a country’s border within a 12 month period.

What is analysis?

Analyzes economic activity.

What does analysis describe?

It describes as to why some prices for some items are higher than others, and why do people earn higher wages than others.

What is explanation

After understanding the analysis of description, it uses facts to explain it

What is prediction?

Economics is the study of what happened and what tends to happen to help predict the future

Who are producers?

Individual artists who sell on street to giant corporations

What are factors of production?

Resources required to produce things we would like to have.

What is land?

Land is natural resources not created by people.

What is capital?

Capital is tools, equipment, machinery, and factories used in production of goods and services

What is labor?

Labor is people with all their efforts, abilities, skills, except for entrepreneurs

What are entrepreneurs?

Risk takers in search of profits who do something new with existing resources

Example of land

Mineral deposits, livestock, sunshine, climate is necessary to grow crops

Example of capital

Tools, equipment, machinery, and factories used in production of goods and services

Example of labor

Manual laborers, lawyers, doctors, teachers, waiters

Example of entrepreneurs

Henry Ford, Steve Jobs, Bill Gates

What is Production Possibilities Curve used for?

Used to illustrate all possible combinations of output/frontier. If a point is on the line, it’s on maximum output. If it’s withing the frontier it results in inefficiency. If it’s outside the frontier, it can’t be reached due to all resources being used.

What is opportunity cost?

Choice you make is value of next best alternative.

Example opportunity cost

Spending time doing hw means opportunity cost is hanging out with friends

What are trade-offs?

Alternative choices given up in favor of choice we select

Example of trade-offs

Going to movies means we trade-off time and money

What are consumer rights?

Consumers help decide what producers will make

Example of consumer rights

If consumers want more clothes than cars, consumers will start buying more clothes and less cars.

What is consumerism?

Movement to educate buyer about purchasing, make and demand better, and safer products from products.

Who added the rights?

JFK added the first 4, Nixon added the 5th

What are the rights?

Right to safety, Right to be informed, Right to choose, Right to be heard, Right to redress.

What is Right to safety

Protection against goods that are dangers to life and health

What is Right to be informed

Receive info if making reasoned choices and protection against fraud

What is Right to choose

Protected in markets where competition may not exist

What is Right to be heard

Guarantee that consumer interests will be considered when laws are being written

What is Right to redress

Ability of consumer to receive adequate payment from producers if they’re harmed by product

When does economic growth occur?

Economic growth occurs when a nation’s total output of goods and services increase over time?

Why is economic growth important

Scarcity, All people want more goods/services than they have now. If population grows, more people will want goods/services in future.

What will investing require?

Investing may require us to limit our current consumption

What is productivity?

Productivity is a measure of amount of goods/services produced with given amount of resources in specific period of time.

What does the production possibilities curve (PPC) show?

PPC displays various combination of goods/services that can be produced when all factors of production are fully employed

What can investing in new physical or human resources do?

They can increase both future and capital

What are Human Capital

Some of peoples skills, abilities, health, knowledge, or motivation.

How does the chart flow?

Producer Markets→Individuals→Factor Markets→Businesses. OR Product Markets→Businesses→Factor Markets→Individuals

What other way does the chart flow?

Business income→Payments for resources→Income from resources→ Consumer Spending. OR Goods Services→Land, Capital, Labor, Entrepreneurs→Buy Producer goods→Goods services

What is a factor market?

Where all individuals earn their incomes. They sell labor to the employer in exchange for wages, employee pays you.Also factors are bought and sold here.

What is a product market?

After individuals receive income from resources they sell in factor market, they spend in product market. Producers also sell their goods and services

In a traditional economy, where does nearly all economic activity come from?

It stems from customs, rituals, or habits.

Examples of traditional economy

Inuit children taught to survive harsh climates by making tools, fishing and hunting. The children will then teach these skills to the next generation that comes after them.

Who would get the first choice after a hunt?

The hunter most responsible for the kill would get first choice, then second hunter chose, etc… And instead of getting the whole animal the hunter would get respect from the entire village and honor of the kill

What are the advantages of traditional economy?

Everyone knows what roles to play, little uncertainty on what to produce (Family of hunters hunt and family of farmers farm), little uncertainty on how to produce (Do things the same way your parents did)

What are disadvantages of traditional economy?

Tends to discourage new ideas and ways of doing things, strict roles in traditional societies tend to punish those who act differently or break rules, lack of progress leads to stagnation and a lower standard of living

What are command economies?

Central authorities make major decisions about what, how, and whom to produce

Who runs command economies?

Kings, Dictator, President, Tribal leader, etc…

Who decides to build stuff and decides who receives them?

The government

Is the central authority good at Running the country?

Yes AND No, they can either be generouse and distribute wealth to benefit all. OR they can plunder the country into the ground for exclusive benefitsof themselves.

Examples of Command Economy?

North Korea, they control everything. Even tourism

Which countries were socialist but collapsed or changed to capitalism?

Cuba, Vietnam, Venezuela, USSR, Denmark, Sweden, Norway

What are advantages of a command economy?

THey can change very quickly, an example of this is in 1910 the USSR went from agricultural society to heavy industry in just a few decades.

What are disadvantages of a command economy?

Rewards for individual initiatives are bare, large decision-making bureaucracy is necessary to plan production and distribution of basic goods, tends to stay small

What is a a market economy?

Arrangement when buyers and sellers interact to determine prices and quantities of goods and services. What, how and for whom are answered by by the people who make supply and demand decisions in their own best interests.

What are some characteristics of a market economy?

People are allowed to spend their money on what they want most. Each dollar is also a “vote” for those products so producers know what to produce.

What is capitalism?

Where private citizens own and use factors of production for their own gain. It also dras attention to private ownership.

Who stressed the market economy in America?

Alexander Hamilton, and he did it in the Federalist papers

Example of a Market economy.

Most countries around the word are based on market capitalism

Advantages of Market economy.

High degree of individual choice to choose where to work, spend on almost any good or service invest in themselves. Producers are also free to choose what to produce, whom to produce, whom they want to hire,, what they want to produce. Markets adjust over time. Small government interference, Decision making is in hands of the people, high degree of customer satisfaction since people get what they want.

What is an example of markets adjusting over time?

Lower gas prices caused people to buy gas guzzling SUV’s

What are disadvantages of a market economy?

Doesn’t provide for all. Basic goods and services may not be provided since producers chase profit. High degree of uncertainty.

Example of not providing for all

Young, old, sick cannot provide for themselves, usually need aid from family, government, or charitable group

Exampple of basic goods and services may not be provided

Roads, libraries, universal education, or complete health care not provided for

Example of high uncertainty

Company may move to cheaper country, leaving workers unemployed