Chapters 1-4 Economics Review Flashcards

Comprehensive vocabulary flashcards covering basic economic concepts, systems, demand, and supply as outlined in the review handouts.

Scarcity

The fundamental economic condition where resources are limited but human wants are unlimited.

Economics

The study of how people satisfy unlimited wants with scarce resources.

Need

A basic requirement for survival, such as food, clothing, and shelter.

Want

Something desired but not necessary for survival.

Factors of Production

The four resources required to produce goods and services: Land, Capital, Labor, and Entrepreneurs.

Land

Natural resources, or the "gifts of nature," used in production.

Capital

The tools, equipment, and factories (capital goods) used in the production of goods and services.

Labor

People’s efforts, abilities, and skills contributed to production.

Entrepreneur

A risk-taker who starts businesses and brings new ideas to market.

Goods

Tangible items used to satisfy wants and needs.

Durable Goods

Goods that are intended to last for more than $3$ years.

Services

Intangible work performed for others.

Utility

The ability of a good or service to provide satisfaction or to satisfy a want.

Value

The worth of a good or service in dollars and cents, requiring both scarcity and utility.

GDP (Gross Domestic Product)

The total value of all final goods and services produced within a country's borders in $1$ year.

Trade-off

An alternative that must be given up when a choice is made.

Opportunity Cost

The value of the single next-best alternative given up when a choice is made.

Production Possibilities Frontier (PPF)

A curved line showing the maximum combinations of two goods or services that can be produced when resources are fully used.

TINSTAAFL

An acronym for "There Is No Such Thing As A Free Lunch," representing the idea that everything has a cost.

Factor Market

A market where individuals sell their resources (labor, land, etc.) to businesses.

Product Market

A market where businesses sell goods and services to individuals.

Economic Growth

An increase in total output over time, often driven by productivity, investment in human capital, and specialization.

Productivity

The amount of output produced per unit of resource, such as output per worker.

Human Capital

Investment in people's education, skills, and health to increase future income.

Division of labor

Organizing work so that each individual worker completes a separate part of the overall task.

Specialization

Assignment of tasks to the workers, factories, regions, or nations that can perform them most efficiently.

Economic System

The organized way a society provides for the wants and needs of its people.

Traditional Economy

An economic system where decisions are based on ritual, habit, and custom.

Command Economy

An economic system where a central authority or government makes all major economic decisions.

Market Economy

An economic system where decisions are made by individuals and businesses through buyers and sellers.

Capitalism

An economic system where private citizens own and use the factors of production.

Mixed Economy

An economic system that combines elements of traditional, command, and market systems.

Socialism

An economic system where the government owns some basic resources.

Communism

An extreme command system where all property is collectively owned by the state.

Economic Freedom

The social goal focusing on the right of individuals to make their own economic choices.

Economic Equity

The social goal focusing on fairness, exemplified by laws like minimum wage and anti-discrimination.

Economic Security

Protection from economic risks such as job loss or illness through programs like Social Security.

Profit Motive

The incentive that encourages people and organizations to improve their material well-being by taking risks.

Consumer Sovereignty

The role of the consumer as the ruler of the market, determining WHAT is produced.

Demand

The desire, ability, and willingness to buy a product.

Law of Demand

The rule stating that as the price of a product increases, the quantity demanded decreases, and vice versa.

Income Effect

The change in quantity demanded because a price change alters consumers' real income.

Substitution Effect

The change in quantity demanded because a change in price makes a good more or less expensive relative to other goods.

Marginal Utility

The extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product.

Diminishing Marginal Utility

The principle that the extra satisfaction from a product decreases as more units are consumed.

Substitutes

Products that can be used in place of one another.

Complements

Products where the use of one increases the use of the other.

Elastic Demand

A situation where a change in price causes a relatively large change in quantity demanded.

Inelastic Demand

A situation where a change in price causes a relatively small change in quantity demanded.

Supply

The amount of a product that producers are willing and able to offer for sale at all possible prices.

Law of Supply

The rule stating that producers will offer more for sale at higher prices and less at lower prices.

Subsidy

A government payment to an individual, business, or other group to encourage or protect a certain type of economic activity.

Elasticity of Supply

A measure of the way in which the quantity supplied responds to a change in price.