Basic Economic Questions

1)It is the basic economic problem.

2)It is a situation that exists when there are not enough resources to meet human wants.

3)The principle that limited amounts of goods and services are available to meet unlimited wants

What is scarcity?

WHAT will be produced? HOW will it be produced? FOR WHOM will it be produced?

What are the 3 key economic questions?

All natural resources used to produce goods and services. Examples are oil, minerals, land, trees, etc

What is land?

All the human time, effort, and talent used to produce goods and services. Examples are workers and their skills

What is labor?

Any human-made resource that is used to produce other goods and services. Examples are factories (plants), equipment, machinery, etc

What is capital?

Individuals who use the other factors of production to produce a product. Examples they are innovative and take risks

What is an entrepreneur?

some action or something to give so someone could act in a certain way

What are incentives?

It is the measure of the satisfaction derived from consumption of goods and services

What is utility?

There Is No Such Thing As A Free Lunch

What is TINSTAAFL?

it would still cost or give something up

What does TINSTAAFL mean?

All the alternatives that we give up whenever we choose one course of action over another

What are trade-offs?

The next best alternative given up when a choice is made

What is an opportunity cost?

the extra cost of adding one unit

What is marginal cost?

the extra benefit of adding one unit (MR greater than or equal to MC)

What is marginal benefit?

all resources are being fully unitized

What is an efficient use of resources?

you have more resources than what you are using

What is an underutilization of resources?

shifting our resources from producing one item from the next results in a greater cost

Law of Increasing Opportunity Costs

Production Possibilities Curve (Frontier)

Production Possibilities Curve (Frontier)

opportunity cost

What economic concept does the PPC represent?

any point inside the curve represent an underutilization or inefficient use of resources

What does a point inside the PPC represent?

law of increasing opportunity costs

Why is the PPC bowed out?

any point beyond the curve is unattainable

What does a point outside the PPC represent?

You determine what you give up to produce one more item of another good; opportunity cost

How do you compute the cost of choosing one combination over another? (What is this called?)

encourage more capital goods to be produced

How does a country promote economic growth?

beliefs and customs determines the goods and products that are created. Used often in rural and farm-based areas

What is a traditional economy?

sets forth certain economic roles for all members of the community. Sable, predictable, and continuous life

What are the strength of Traditional Economy?

discourages new ideas and new ways of doing things. stagnation and lack of progress

What are the weaknesses of Traditional Economy?

government owns most property resources. Economic decision making occurs through a central economic plan

What is a command economy?

capable of dramatic change in a short time

What are the strengths of a Command Economy?

does not meet wants and needs of consumers. Lacks effective incentives to get people to work. Requires large bureaucracy (uses resources), Has little flexibility to deal with small day-to-day changes

What are the weaknesses of a Command Economy?

the system is characterized by: private ownership of resources, use of markets and prices to coordinate and direct economic activity, acting in one's own self- interest

What is a market economy?

is able to adjust to change gradually. Individual freedom for everyone. Notable lack of government interference. Decentralized decision making. Incredible variety of goods and services. High degree of consumer satisfaction

What are strengths of a market economy?

rewards only productive resources. Many people are too young, too old, or too sick to work. Must guard against market failures

What are the weaknesses of a Market Economy?

someone sits down and says we need to produce this and that and they plan out the economy (union)

What is a centrally planned economy?

is an economic system in which both state and private sector direct the economy

What is a mixed economy?

where you process property

What are property rights?

pure capitalism, or laissez-fair capitalism, government's role would be limited to protecting private property, establishing an environment appropriate to the operation of the market system; economic system where the factors of production are owned by
individuals.

What is capitalism?

trading one service for another for free. Both are wiling and will benefit

What is a voluntary exchange?

is an economic system in which both state and private sector direct the economy

What is a mixed economy?

competition is the basic in a market system, you be more efficacy with lowing the prices

What is the role of competition in a market system?

it is the idea that consumers have the ultimate control over what is produced. This is because they are free to buy what they want and to reject what they don't want

What is consumer sovereignty?

it is a situation in which people concentrate their efforts in the activities that they do best

What is specialization?

philosopher, father of economic, division of labor

Who is Adam Smith?

bringing producers and buyers, all market making the decision on what is produced

What is Adam's Smith's Invisible Hand theory?

Price

What is the most important factor in choosing a good or service?

Study of how people seek to satisfy their needs and wants by making choices

economics

yes; education, technology, new source of resource, trade

Can you shift curve outward?

human made items made to produce other goods

capital good