Economics and Personal Finance Unit 2: Economic Decisions

What kind of things help to determine whether something is necessary or not?

Country you live in, economic status and lifestyle of your family, the work you od

Tariff

Tax on imported goods. Can work to protect national security.

Comparative advantage

Occurs when an individual (or country) carries out an economic activity with a lower opportunity cost than another individual (or country).

Absolute advantage

When an individual (or country) carries out an economic activity more efficiently than another individual or group. They can produce more output using fewer inputs.

Shareholder

Someone who owns stock in a company.

What do businesses use to produce goods and services?

Economic resources

What are economic resources?

The things available to be used to produce goods services

What are the three types of economic resources?

Natural, human, capital

What are natural resources?

Raw materials supplied by nature

What are human resources?

The people who produce goods and services

What is an entrepreneur?

The risk taker who uses resources to create a new product or service

What are capital resources?

The products and money used in the production of goods and services

T or F: It is not always easy to determine the products and services that satisfy needs and those that satisfy wants.

True

What would an economist most likely classify as a need?

Gasoline for a florist’s delivery truck

What is an example of a natural resource?

Sunlight

What is the basic economic problem?

The mismatch of unlimited wants and needs and limited economic resources

What does the basic economic problem result from?

Scarcity

What is scarcity?

Not having enough resources to satisfy every need

What is economic decision making?

The process of choosing which needs and wants will be satisfied

What is a trade-off?

When you give up something to have something else

What is the opportunity cost?

The value of the next-best alternative that you were not able to choose.

The decision-making process is best to use when:

you are facing a decision with several good alternatives

John has two hours before having to go to his part-time job. He is deciding between studying for a math exam and taking a nap. If John chooses to take a nap, the opportunity cost of his decision is:

the score he will earn on the math exam

What are the three economic questions?

What will be produced, how will it be produced, who gets what is produced

What four important principles is the U.S. economic system based on?

Private property, freedom of choice, profit, and competition

What is the right of private property?

Ability to own, use, or dispose of things of value

What is freedom of choice?

Can make economic decisions independently and must accept the consequences of those decisions

What is profit?

The money left from sales after all of the costs of operating a business have been paid

What is competition?

The rivalry among businesses to sell their goods and services

What is an example of addressing the economic question of how to produce?

Requiring individuals to complete specific types of work

What is supply?

The quantity of a good or service that businesses are willing and able to provide

What does the demand curve illustrate?

The relationship between the price of a product or service and the quantity demanded by consumers

As the price decreases,

the number of consumers willing and able to purchase the product and the quantity they will purchase increases

What does the supply curve illustrate?

The relationship between the price of a product and the quantity businesses are willing to supply

If many consumers want a particular good or service,

its prices tend to go up

What is market price?

The point where supply and demand are equal

T of F: Both individuals and organizations can be producers?

True

As competition rises,

prices usually decrease