sefnomics

What is economics?

the choices people make a

the resources are limited so people study

how people choose to fulfill their unlimited wants and needs using these limited resources

Micro economics

how individuals,businesses and household make descions

Marco economics

How an entire economy functions

What is the economy of the U.S.

U.S. market economy

Costs

what you spend when you make a choice (time, money, resources)

In a given area (usually a nation) an economy describes

the production, distribution and consumption of limited resources

Scarcity

all resources are limited

Tradeoffs

What you give up every time you make a choice (usually a list of options you gave up)

Since all resources are scare

people and societies must make choices that force them to make tradeoffs

Scarcity forces

trade-offs

TANSTAAFL

There ain't no such thing as a free lunch refers to the principal that every choices requries tradeoffs

Benefits

what you gain when you make a choice (time, money resources)

What is the costs versus benefits principle, when people make a choice

it always because they think (consistouly or subconsistoinaly that the benefits outweigh the costs)

What is a cost-benefits analysis

Listing out the costs and benefits of a decision and then making a choice

Margin

the outside edge or border

Marginal Benefit

what you gain by adding one unit of something ex:time

Marginal Cost

what you lose by adding one unit of something

What is thinking at the margin

considering the marginal cost and benefit involved in making a decision

Example of thinking at the Margin

Considering the marginal cost and benefit of consuming one more boba

What is an incentive?

something that motivates a person to act in a certain way

Example of incentive

your parents/guardians offer to pay you $50 per "A" you get this semester. the money is an incentive to work hard in your classes

Why do incentives matter?

they motivate our behavior whether we realize it or not

People respond to incentives in

predictable ways

What is a trade?

voluntary exchange of goods

Example of trade

you trade 10 cents for a pencil

We trade because

its inefficient to make everything we need

Example of trade making people better off

You specialize in making pencil pouches. Someone else specials in making pencils. you trade each other for what you need. everyone is better off

Trade allows certain people or countries to

specialize and then trade for what they need/want

What is a market

A space where buyers and sellers trade (do business)

In a marketplace with limited government intervention

buyers and sellers are free to conduct trade

In this type of marketplace the buying and selling of goods/ services is

naturally efficient

Adam Smith described the efficiency of free markers as the

"Invisible hand" guiding buyers and sellers

When we make descions

the effects or consequences are far- reaching

A choice we make today may

impact us or other people in the long run

What three questions must every economy answer

1. What goods and services
2. How should these goods and services be produced
3. Who gets these goods and services

Because of tradeoffs economies must prioritize/ choose

what to focus on and where to spend its resources

Economic Freedom

Allows individuals to make economic decisions without government interferecne

Economic efficiency

reducing waste while making sure most consumers are able to get what they want

Economic Equity

Evenly distributing the wealth of a nation to make sure there is fairness in allocation resources

Economic Growth

Improving the standard of living through innovation and economic growth

economic security

supporting and providing necessities for the poor or disadvantaged

Economic Stability

all necessities are consistently available for the public without uncertainty

An economic system

answers the 3 basic economic questions for a nation or soceity

What does an economic system determine

Production, distribution and consumption

What is a Traditional Economy

custom ritual and tradition determines what is produced, how it's made and who consumes it

Traditional Economies prioritize

Stability and Security

Command Economy

All economics decisions are made by the government, usually a dictator

Command economies priortieze

Stablility

Socialist countires theoretically prioritize economic equity and security

at the cost of economic freedom and growth

What is a market economy?

All economic decisions are made by individuals and businesses with no government regulation

Adam Smith, "invisible hand" describes how goods and services are effciently

without a government overseeing distribution

Market Economy priortize economic

freedom,growth and effcieny at the cost of economic equity

mixed economy

all economic descisons are made by the government and individuals

In the modern world , most economies fall in the category of a mixed economy, though they usually favor the

characteristics of either market or command

in mixed economy government usually oversees or regulates markets while

indivuadlas have a degree of choice

Goods

physical items created for selling

Services

Actions or activities done for buyers

Inputs

scare resources that go into making a product

Outputs

the goods or services that are created using inputs

factors of production

Inputs used in making a product, main categories: land,labor and capital, they all equal goods and services

Land

all natural resources used to produce goods and services

perpetual resource

resources were unlikely to use up like sunlight

renewable resource

resources that as they are used, can also be replaced like forests and fish

nonrenewable resource

resources that are used and then gone completely like oil and coal

Labor

the effort and time you put into production for which someone is paided

human capital

the expertise, experience, skill, education and knowledge of laborers (more human capital more pay)

Physical Capital (or capital goods)

physical man made tools, machines and resources involved in the production process

Entrepreneur

the risk taker who combines the factors of production to create goods and services

Productivity

output/input