Economics

What is economics?

The study of how people make decisions with their resources

What is microeconomics?

Deals with behavior and decision making by small units such as individuals

What is macroeconomics?

Deals with the economy as whole and decisions making by large units such as government

What is scarcity?

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

What does “there is no such thing as a free lunch” mean 

This is referring to the fact that nothing is free and everything has a monetary or opportunity cost

What is a need?

A need is something necessary for survival

What is a want?

A want is a luxury or a way of expressing a need

What is an opportunity cost?

Is the highest potential loss

Make an example of a trade-off. Choose an option and identify the opportunity cost.

Going to school is a trade off since we could go to work instead. The money lost would be the opportunity cost.

What are the three basic economic questions?

What to produce?  How to produce?  For whom to produce?

What are the factors of production?

Land, labor, capital goods, entrepreneur

What does Ceteris Paribus mean?

It means that when discussing something in economics we have to assume all other variables stay the same.

What is a durable good?

Durable goods are goods that are expected to last more than three years with regular use

What is a nondurable good?

Are goods that are expected to last less than three years with regular use

What is a capital good?

Are goods intended for use as a means to make more goods

What is a consumer good?

Goods intended for final use by the consumer

What is a service?

A service is something that is performed by someone else in exchange for compensation.

In what situations can a PPC change?

If the country gains more resources or if the country goes in a recession or if the employment rate changes

What are the four types of economic systems?

1. Market economy  2. Command Economy  3. Traditional economy 4. Mixed economy

What is Gross Domestic Product?

The monetary value of all final goods and services produced in a country 

What is the formula for GDP?

C+I+G+Xn=Y

What do businesses do for the economy?

Businesses make jobs, sell products, and flow money in the economy

What do households do for the economy?

They buy products and have the ability to make business they also provide resources

What does the government do for the economy?

The government should stabilize the economy

Explain the Paradox of Value

Paradox of value means that essential items are cheap but non essential items are expensive

What are non-scarce goods?

Nom-scarce goods are goods that are free and available without limits like air and seawater

Discuss how trade-offs and opportunity costs influence decision-making for both individuals and governments. Provide examples.

Trade-offs and opportunity costs influence decisions of individuals and governments by making people choose what would benefit them most. An example of this would be how some people have to drop out of school in high school because they need to work and find that the opportunity cost of losing money is not worth the education provided at school. For the government it would probably be whenever they have to choose what funding should be given for each thing.

What is it called when we sacrifice one thing to obtain another?

Trade-offs

What is the fundamental economic problem that results from scarce resources and people's virtually unlimited wants?

Scarcity

What are the four types of goods

Capital goods, consumers goods, durable goods, and nondurable goods

What are the four factors of production?

Land, labor, capital goods, and entrepreneurs

What is economy?

All the activity in a nation that together affect the production, distribution, and use of goods and services

What are the types of scarcity?

Demand-induced, supply induced, and structural

What is demand-induced scarcity?

People want more of it but there isn’t more

What is supply-induced scarcity?

Supply is very low and can’t keep up with demand

What is structural scarcity?

The system in place doesn’t offer equal assess to this resource.

PPC/PPF

Production possibilities curve or production possibilities frontier

what do the letters in C+I+G+Xn=Y mean

C- consumers, I- businesses, G- government, Xn- net exports, Y-output

what is Market economy?

People and business decide how to allocate resources

what is Command economy?

A central authority usually the government make decisions

What is traditional economy?

Relies on customs, history, and time honored beliefs

What is Mixed economy?

A combination or market, command, and traditional

What is demand

The desire, ability, or willingness to acquire a product

What is law of demand

The quantity demanded of a good/service will vary inversely with its price

What are the demand determinants

Preferences, related goods, income of buyers, consumers, expectations, and substitutes

Demand determinant: Preference

change in trends, tastes, seasons, and popularity

Demand determinant: Related goods 

changes in products that go together 

Demand determinant: Income of buyers

people have more money, they want more stuff

Demand determinant: Consumers

more people=more wants, hence more demand

Demand determinant: Expectations

What consumers think about the future 

Demand determinant: Substitutes

Changes in replacement products

What is elasticity 

The extent to which a change in price  causes a change in quantity demand.

Elastic-

when a change in price causes a relatively larger change in quantity demand

Inelastic-

when a given change in price causes a relatively smaller change in quantity demand

Unit elastic-

A change in price causes a proportional change in quantity demand

what is utility?

usefulness or satisfaction gained from a product

what is marginal utility?

The extra usefulness or satisfaction from acquiring or using one more unit of a product

What does diminishing marginal utility mean?

Every time you use a product, it becomes less satisfying