Economics: Unit Review

Scarcity

Not enough resources for everyone to have everything they want for free.

Opportunity Cost

The value of the next best choice you give up when making a decision.

Microeconomics

Focuses on individual people and businesses and how they make decisions.

Macroeconomics

Looks at the economy as a whole, such as inflation, unemployment, or economic growth.

Traditional Economy

Economy where people rely on customs, traditions, and bartering instead of money.

Command Economy

The government controls everything, including production, prices, and distribution.

Pure Market Economy

Businesses and individuals make all decisions with no government involvement; prices are set by supply and demand.

Mixed Economy

Combination of market and command economies; businesses have freedom, but the government regulates certain areas.

Production Possibilities Curve (PPC)

Shows all possible ways an economy can use its resources to produce two different goods.

Gross Domestic Product (GDP)

Measures the total value of all goods and services produced within a country in a given period.

GDP Formula

GDP = C + I + G + (X - M), where C is Consumption, I is Investment, G is Government spending, X is Exports, and M is Imports.

Nominal GDP

GDP measured at current market prices, without adjusting for inflation.

Real GDP

GDP adjusted for inflation, showing actual growth in production.

GDP per Capita

GDP divided by population, showing average economic output per person.

Intermediate Good

Product used to make a final good, not counted in GDP to avoid double counting.

Final Good

A product sold to consumers for use, counted in GDP.

Capital Good

A good used to produce other goods and services, not consumed directly.

Inflation

Increase in prices over time, reducing the value of money.

Marginal Analysis

Evaluates whether to do one more unit of an activity by comparing its marginal benefit (MB) to marginal cost (MC).

Cost-Benefit Analysis (CBA)

Compares total costs and total benefits of a decision to determine the best option.

Utility

Total satisfaction gained from consuming a product.

Marginal Utility

Additional satisfaction from consuming one more unit of a product.

Law of Diminishing Marginal Utility

As someone consumes additional units of a product, the marginal utility of each extra unit declines.

Adam Smith

'Father of Capitalism'; known for the Invisible Hand and division of labor.

Karl Marx

'Father of Communism'; co-wrote 'The Communist Manifesto' and criticized capitalism.

John Maynard Keynes

'Father of Modern Macroeconomics'; believed in government intervention to stabilize the economy.

Milton Friedman

Leader of Monetarism; supported free markets and controlled money supply.

Capitalism

System where private individuals and businesses own and control production, not the government.

Communism

System where the government owns all resources and production for a classless society.

Socialism

System where government and individuals share control of industries to reduce inequality.

Fascism

Authoritarian ideology emphasizing strict hierarchies, nationalism, and central control.