Economics chap 1

Economics

the study of how individuals, families, businesses, and societies use limited resources to fulfill their wants/needs

Microeconomics

deals w/ behavior and decision making of small units

Macroeconomics

deals w/ economy as a whole and decision making by large firms

land

natural resources/surface land and water

labor

human effort directed to producing goods/services

Goods

objects that fulfills wants/needs

Services

actions that can satisfy wants/needs

Capital

previously manufactured goods used to make other goods

productivity

amount of output that results from a given level of inputs

Entrepreneurship

when individuals take risks, to develop a new product and start a new business in order to make profits

Technology

use of science to develop new products and methods for producing and distributing goods and services

Scarcity

problem that results from a combination of limited resources and unlimited wants.

Choices

the way individuals satisfy their unlimited wants in a world of limited resources

Trade offs

sacrificing one good or service to purchase or produce another.

Opportunity Cost

value of the next best alternative given up for the alternative that was chosen.

Production Possibilities Curve

Graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.

Economy

production and distribution of goods and services in a society

Economic Model

theory or simplified representation that helps explain and predict economic behavior in the real world. ( How consumers will react in a particular situation)

Idea, Collect Facts, Discard Irrelevant facts, form hypothesis, test hypothesis, application

Working with models

School of economic thought

Because of personal views (or values), not all economists will agree that a particular theory offers the best prediction.

Laissez-Faire

adam smith

Intervention

john keynes

REPUBLICANS

Think that free markets will take care of themselves and that government intervention in the markets should be minimal. (Hands off-Laissez-Faire )

DEMOCRATS

Belief that free markets are unstable & governments need to intervene in the economy to help the nation’s citizens. (Intervention-proactive approach)

Microeconomics

The branch of economics that deals with smaller units such as individuals and families is known as:

Microeconomics

Macroeconomics

Economics can be broken down into

2 parts which are _____________ and

_________________.

Land Labor Capital Entrepreneurship Technology

Name the 5 factors of production.

choices

In a world of limited resources, individuals satisfy their unlimited wants by making ___________.

Income/ resources and time

Scarcity exists because people’s __________ and _________ are limited.

one

You can have multiple trade-offs, but only how many opportunity costs?

opportunity cost

The value of the next best alternative that had to be given up due to a decision is known as:

basic factors

Economic models will only show the _______ _______needed to analyze a problem.

Opportunity Cost

Economic decisions always involve trade-offs that have _________. 

production possibilities curve

A graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time is known as:

Laissez faire

Describe Republican attitudes towards the economy.

impossible to predict

Why is it difficult for economists to apply economic models to real life situations?

To explain and predict how consumers will react in a situation

What is the goal of economic models?

intervention

Describe Democrats’ attitudes towards the economy.