Econ Final

Scarcity

The condition that results from society not having enough resources to produce all the things people would like to have.

Need

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

Want

Something we would like to have but is not necessary for survival.

3 Basic questions any society has to answer about the use of its resources?

What to produce?

How to produce it?

From whom to produce?

GDP

The dollar value of all final goods, services and structures produced within a country’s borders in a 12-month period.

Goods

a useful, tangible item.

Consumer Goods

Goods intended for final use by individuals

Durable Goods

Any good that last three years or more when used on a regular basis.

Nondurable Good

An item that last, for fewer than three years when used on a regular basis.

Services

Work that preformed for someone

Four Factors of production: Land

gifts of nature or natural resources not created by people

Four Factors of production: Capital

The tools, equipment, machinery, and factories used in the production of goods.

Four Factors of production: Labor

People with all their efforts, abilities, and skills

Four Factors of production: Entrepreneur

A risk taker in search of profits who does something new with existing resources.

Factor Market

Where the factors of production are bought and sold.

Product Market

Where producers sell their good and services.

Productivity

A measure of the amount of goods and services produced within a given amount of resources in a specific amount of time.

Factors that contribute to productivity: Human Capital

The sum of people’s skills, activities, health, knowledge, and motivation.

Factors that contribute to productivity: Division of labor

A way of organizing workers so that each individual worker completes a separate part of work.

Factors that contribute to productivity: Specialization

Factors of production perform only task they can do better than others.

Opportunity cost

The cost of the next best alternative.

Cost-benefit analysis

A way of comparing cost to the benefit.

Market Economy

Economic system in which people and firms make an economic decisions.

Free Enterprise Capitalism

Consumers and privately owned businesses, not the govt, make the majority at the what, how, for whom decisions.

Law of Demand

Rule stating that consumers will buy more of a product at lower prices and less at higher prices.

Demand Curve

A curve that shows the quantities demanded at all possible prices.

Marginal Utility

Additional satisfaction or usefulness a consumer gets from having one more unit of product.

Change in quality demand

Movement along the demand curve showing that the amount someone is willing to purchase changes when the price changes.

Demand Elasticity

A measure that shows how a change in quantity demanded responds to a change in price.

Elastic Demand

Type of elastic where a change in price results in a relatively large change in quantity. A type

Inelastic demand

Type of elastic where a change in price causes a relatively small or less change in quantity.

Total Expenditures

The aggregate amount of money spent on goods, services, or investments by a person, business, or government.

Law of Supply

Principle that more will be offered for sale at high prices than at lower prices.

Supply Curve

A graph that shows the different amounts of product supplied over a range of possible prices.

Change in quantity supplied

Change in amount offered for ale when the price changes.

Subsidies

Gov’t payment to encourage or protect a certain economic activity.

Supply Elasticity

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

Short run

Production period so short the variable inputs can be changed.

Long run

production period long enough to change the amount of all inputs.