econ test notes

Splitting up the process of production into specific tasks is called the

division of labor

economic stystem

is a set of rules through which production is organized

In capitalism, the question for whom?

is decided according to the value of a person’s contribution to production.

Greater efficiency in production allows some people to produce

specialized capital instead of making goods for current consumption.

In a command economy

the three basic economic questions are answered by the government.

In a market

economy, the question what is decided according to what is purchased.

wealth

is an accumulation of products that have been produced.

In capitalism, the question how?

is decided according to the firm’s costs of production and profits.

capitalism

is an economic system in which the basic economic questions are answered by private individuals and not the government.

When people do one particular task and buy other things they need, there is

specialization

In capitalism the what?

is decided according to the profits firms can make.

The desire to earn a profit

is the reason for starting a business in capitalism.

In a traditional economy

the basic economic decisions are made according to traditions.

labor

“human effort” applied to resources in order to produce. 

production

 the creation of any kind of good or service.

capital

“tools” used by labor in the production process.

recourses

anything that can be used for production.

entrepreneurship

the organization and risk necessary to bring production about (primary/foundational).

factors of production

the four general classifications of things that can be combined in order to produce.

natural recourses

These things “of nature” have not been altered or changed by human hands.

model

a theory or an idea of what something is like or how something works.

positive information

information based on fact.  It can be proven.  It is empirical.

normative information

information based on opinion.  Cannot be proven yet.  Could be false.

rational choice

taking the things with greater value and giving up those with lesser values.

PPF

a graph that shows the different combinations of two products that could be produced from a given quantity of resources.

opportunity cost

The value of your second choice that you give up when you take your first choice is

scarcity

The central problem in economics is (a choice)

Economics

is the study of the production, distribution and consumption of goods and services.

trade off

When you give up one thing for another, you are making a

goods

Tangible things that satisfy human wants and needs are

services

Intangible things that satisfy human wants and needs are

recourses

are all the things necessary to produce goods and services.