Econ Unit 1 Study Guide

Absolute Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

Adam Smith

An economist known as the father of modern economics, who introduced the concept of the invisible hand and free market principles.

Advantages of the Market Economy

Benefits such as efficiency, innovation, and consumer choice that arise from a system where prices are determined by supply and demand.

Capital

Financial assets or resources used to produce goods and services.

Capitalism

An economic system characterized by private ownership of the means of production and their operation for profit.

Capital Goods

Goods that are used in the production of other goods, such as machinery and tools.

CELL

An acronym for Capital, Entrepreneurship, Land, and Labor, which are the four factors of production.

Circular Flow of Economic Activity Diagram

A model that illustrates the flow of goods, services, and money in an economy, showing economic interdependence.

Command Economy

An economic system where the government makes all decisions regarding the production and distribution of goods and services.

Communism

A political and economic ideology advocating for a classless system in which the means of production are communally owned.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity at a lower opportunity cost than another.

Competition

The rivalry among sellers to attract customers while lowering costs.

Consumer Goods

Products that are purchased for personal consumption.

Cost Benefit Analysis

A process of comparing the costs and benefits of a decision or project to determine its feasibility.

Demand Side Economics

Economic theory that focuses on increasing demand to stimulate economic growth.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the additional satisfaction gained from consuming each additional unit decreases.

Economic Schools of Thought

Different theories and perspectives on how economies function, such as Keynesian and Austrian economics.

Economic System

The structure by which a society allocates its resources and distributes goods and services.

Efficiency

The optimal use of resources to achieve the best possible outcome with minimal waste.

Entrepreneur/Entrepreneurship

An individual who creates and manages a business, taking on financial risks in the hope of profit.

Externalities

Costs or benefits of economic activities that affect third parties and are not reflected in market prices.

Factors of Production

The resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Goods

Items that satisfy human wants, categorized into durable goods, capital goods, consumer goods, and non-durable goods.

Guns vs Butter

A model illustrating the trade-off between a nation's investment in defense and civilian goods.

Incentives

Factors that motivate individuals to perform an action or make a decision.

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the marketplace.

Keynesian Economics

An economic theory advocating for government intervention to manage economic cycles and stimulate demand.

Labor

The human effort used in the production of goods and services.

Land

Natural resources used in the production of goods and services.

Marginal Costs

The additional cost incurred from producing one more unit of a good or service.

Market Economy

An economic system where supply and demand determine prices and production.

Microeconomics

The branch of economics that studies individual consumers and businesses.

Mixed Economy

An economic system combining elements of both capitalism and socialism.

Opportunity Costs

The value of the next best alternative that is forgone when making a decision.

Paradox of Value

The apparent contradiction where some necessities have a low market value, while some non-essentials have a high market value.

PPF/PPC Graph

A graphical representation of the production possibilities frontier, illustrating efficiency, underutilization, and production impossibility.

Production Possibilities Frontier

A curve depicting the maximum feasible amount of two goods that can be produced with available resources.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Supply Side Economics

An economic theory that emphasizes boosting supply to stimulate economic growth.

Three Fundamental Economic Questions

What to produce, how to produce, and for whom to produce.

Thinking on the Margin

The process of considering the additional benefits and costs of a decision.

Thomas Malthus

An economist known for his theories on population growth and its impact on resources.

TINSTAAFL

An acronym for "There Is No Such Thing As A Free Lunch," emphasizing that every choice has a cost.

Trade-offs

The alternatives that must be given up when making a decision.

Traditional Economy

An economic system in which people produce and distribute goods according to customs or traditions handed down from generation to generation.

Five goals of a party’s National Convention

1. Official announcement of presidential candidate

2. Officially announce VP candidate

3. Mending fences and promote unity

4. Revise Party platform

5. Gain media attention

Primaries

Elections held in each state usually by members of the party to vote for the candidate to represent their party in general elections. (Choosing delegates to send to vote for the candidates that the primary voters of the party selected).

Caucuses

Town meetings held within a state where party members discuss and debate candidates and vote for delegates (who represent a candidate) to send to the national convention.

Delegates

Representatives chosen during primary elections and caucuses to vote for a party’s presidential candidate at the national convention.

Utility

The amount of satisfaction or pleasure a consumer gets from a product or service, the capacity to be useful to someone, is not measurable.

Wealth

The sum of economic products that are tangible, scarce, useful, and transferable from one person to another.