Consumer economics Unit 1

economics

study of how people try to satisfy their needs through the careful use of scarce resources

scarcity

condition of not having enough resources to produce all things people want

3 basic questions of economics

what to produce?

how to produce?

for whom to produce?

factors of production

land, labor, capital, and entrepreneurship

land

all natural resources used to produce goods and services

labor

people with all their efforts, abilities, and skills

capital

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

entrepreneurs

considered the driving force in an economy because they start a new business

adam smith

seen as father of capitalism. published the wealth of nations in 1776

profit motive

incentive that encourages people and organizations to improve their material well-being

profit

extent to which individuals are better off at the end of a period than at the beginning

GDP

the total market values of all final goods and services produced annually in an economy

good

tangible item that is economically useful or that satisfies and economic want

service

any activity that fulfills a human want to need and returns money to those who provide it

utility

ability or capacity of a good or service to be useful and give satisfaction to someone

value

worth that can be expresses in dollars or cents

wealth

sum of those economic products that are tangible, scarce, useful, and transferable

paradox of value

term for some necessities have little value whole some non-necessities have a much higher value

trade-offs

alternative choices made by consumers in the marketplace

opportunity cost

cost of the next-best alternative use of money, time, or resources when once choose is made

alternative choices of action

a decision-making grid used to evaluate and arrive at an economic decision between these

cost-benefit analysis

a way of thinking about a problem that compares the costs of an action to the benefits received

production possibilities frontier

a popular model used to illustrate the concept of opportunity cost

standard of living

quality of life based on the ownership of the necessities and luxuries of life

voluntary exchange

act of buyers and sellers freely and willingly engaging in market transactions

private property rights

the principal that people have the right to control their possessions and use them as they wish

modified free enterprise system

a free enterprise economic system with some government involvement

economic system

organized way in which a society provides for the wants and needs of its people

market economy

an economic system in which people choose freely what to buy and sell

command economy

an economic system in which the government controls a country’s economy

traditional economy

economy where people follow traditions and customs

mixed economy

economic system that has some combination of traditional, command, and market economies

capitalsim

an economic system based on private property and free enterprise with limited government involvement

socialism

an economic system in which the government owns some of the factors of production “bridge the gap”

communism

economic system where a central authority makes most of the What, How, and For Whom decisions