Unit 1 Economics and Choice Practice Flashcards

A set of vocabulary flashcards covering the fundamental concepts of economics, including resource allocation, market types, trade, and the systems of capitalism vs. communism.

Economics

The study of resource allocation (managing resources to satisfy needs and wants).

The 3 economic questions

1. What goods and services to produce? 2. How to produce the good or service? 3. Who is the consumer (how much to produce)?

Consumer

Buyers of the good or service being offered, where needs are priority and wants are next.

Producer

Those who make or create the good or service being sold or offered.

Inflation

Prices rising, which limits consumers because they cannot buy as many goods & services.

Deflation

Prices falling, causing consumers to hold on to money, leading to supply increases.

Command Economy

An economy where the government answers the 3 economic questions.

Free enterprise economy

An economy where private businesses answer the 3 economic questions based on market conditions.

Imports

Goods produced in other countries brought in and sold in the US.

Exports

Goods produced in the United States and sold in other countries.

Scarcity

Resources are hard to find, which typically drives prices up.

Surplus

Having too much of a resource or supply, which typically drives prices down.

Opportunity cost

The cost of the next best thing you could have been doing with your time.

Microeconomics

Small scale economics focusing on individuals or individual businesses.

Macroeconomics

Large scale economics focusing on country or world economics trends.

Primary goal of monetary policy

To manage the supply of money and interest rates.

Example of fiscal policy

Increasing government spending.

Goal of a production possibility curve

Allows businesses to find their most productive output level to maximize supply to meet demand and increase business profit.

Elements of Capitalism (US)

Private Property, Profit/profit motive, Competition, Free market/open opportunity, Consumers/Producers, managed scarce resources, Infrastructure, Laissez-faire vs govt regulation, and Safety Net/Transfer payments.

Karl Marx

Author of the Communist Manifesto in 1848, central to the theory of Communism.

Bourgeoisie

The middle class in the economy according to Marx's theory.

Proletariat

The social class with no significant ownership to anything with production.

Goals of Communism

Ending inequality of income/resources where everyone gets the same amount, natural evolution from capitalism, ending exploitation of workers, and distributing resources based on need.

Criticism of Communism

Laziness, inefficient, loss of culture or freedom, and no religion.