Economics Fundamentals

What is economics?

Study of how societies use scarce resources to meet unlimited wants.

Why does choice play a role in economics?

Limited resources require choices.

What are the 4 factors of production?

Land, labor, capital, entrepreneur.

What is land?

Natural resources used in production.

Examples of land?

Water, forests, minerals.

What is labor?

Human effort used in production.

Examples of labor?

Teachers, nurses, workers.

What is capital?

Resources used to produce goods/services.

What is physical capital?

Man-made tools and equipment.

Examples of physical capital?

Machines, buildings, tools.

What is human capital?

Workers' knowledge and skills.

What is an entrepreneur?

Person who organizes resources and takes business risks.

What is scarcity?

Resources are limited; wants are unlimited.

What is a shortage?

Temporary lack of a product.

Scarcity vs. shortage?

Scarcity is permanent; shortage is temporary.

What are needs?

Things necessary for survival.

What are wants?

Things people desire.

Needs vs. wants?

Needs are necessary; wants are desired.

What are goods?

Physical products.

What are services?

Actions provided for others.

Goods vs. services?

Goods are physical; services are actions.

What is opportunity cost?

Next-best choice given up.

What is a trade-off?

All choices given up.

Opportunity cost vs. trade-off?

Opportunity cost = next-best; trade-off = all given up.

What is guns and butter?

Trade-off between military and consumer goods.

What is the law of increasing costs?

More production causes higher opportunity costs.

What is a PPC?

Shows possible production combinations.

What is efficiency?

Maximum possible production.

What is underutilization?

Resources are not fully used.

What are the 3 economic questions?

What, how, who.

What does "what" ask?

What should be produced?

What does "how" ask?

How should it be produced?

What does "who" ask?

Who receives it?

What is capitalism?

Private ownership and free markets.

What is a command economy?

Government controls production.

What is a mixed economy?

Markets + government control.

What is a traditional economy?

Based on customs and traditions.

What is free enterprise?

Private ownership and free markets.

What is the profit motive?

Desire to earn profit.

What is competition?

Businesses compete for customers.

What is consumer choice?

Consumers choose what to buy.

What is GDP?

Value of final goods/services produced in a country.

What does GDP measure?

Economic production.

What is the business cycle?

Ups and downs of economic activity.

What is expansion?

Economic activity increases.

What is a peak?

Highest point of activity.

What is contraction?

Economic activity decreases.

What is a trough?

Lowest point of activity.

What is macroeconomics?

Study of the whole economy.

Examples of macroeconomics?

GDP, inflation, unemployment.

What is microeconomics?

Study of individuals and businesses.

Examples of microeconomics?

Prices, consumers, businesses.

Macro vs. micro?

Macro = whole economy; micro = individuals/businesses.

What are regulatory agencies?

Government agencies that enforce rules.

What does the FDA do?

Regulates food and drugs.

What does the FTC do?

Protects consumers and competition.

What does the FCC do?

Regulates communications.

What does the FAA do?

Regulates aviation safety.

What does the EPA do?

Protects the environment.

What does OSHA do?

Protects workplace safety.

What does the CPSC do?

Protects consumers from unsafe products.

What does the NRC do?

Regulates nuclear safety.

What does the EEOC do?

Enforces workplace discrimination laws.