unit 1 economics

scarcity

• unlimited needs and wants, but limited resources.

• this condition forces individuals and societies to make choices

• demand>supply

opportunity cost

the measurement of what your have given up in order to make a given choice. it is not a price: it is specifically what you could have done with the time or money instead.

factors of production

the inputs used to produce a good or service in order to produce income.

• land: natural resources used to make products (water, trees, oil, and land)

• labor: the human work needed to produce goods and services (workers, teachers, doctors)

• capital: tools, machines, buildings, and equipment used to produce goods

• entrepreneurship: the ability to start and organize a business while taking risks to earn a profit.

paradox of value

why some things that are very useful like water, are cheap, while things that are less useful, like diamonds, are expensive.

• this happens bc of differences in scarcity and marginal utility (the extra satisfaction or benefit you get from consuming one additional unit of a good or service)

demand

how much someone is willing and able to buy

supply

how much someone is willing and able to produce

production possibilites curve (PPC)

a graph showing the maximum amount of two products an economy can produce using its available resources

• outward : more resources, better technology, a larger workforce, or improved education increase production ability.

• inward : natural disasters, war, resource shortages, or destruction of factories decrease production ability.

productivity

how much output is produced using a certain amount of resources in a given time

economic growth

an increase in an economy’s ability to produce goods and services over time

circular flow activity

a model showing how money. goods, services, and resources move between households and businesses

product marked

a market where households(consumers) buy goods and services from businesses

• consumers buy products

factor market

a maker where households sell/provide the factors of production (land, labor, capital, and entrepreneurial airship) to businesses in exchange for income.

• businesses buy resources from households

TINSTAAFL(there is no such thing as free lunch”

everything has a cost even if you don’t pay for it, because you give up smth else.

command economy

central authority makes major decision about what, how, or for whom to produce

market economy

production is decided by people who make supply and demand decisions based on their own best interests

traditional economy

everyone has a set role, of what they do/produce

• based on tradition

• use resources available to them

mixed market

an economy where private businesses own and operate most industries, but the government regulates businesses and provides public services.

• more private businesses, some government control

mixed socialist economy

an economy where the government owns or controls more industries and provides more public services to reduce inequality and meet people’s basic needs.

• more government ownership and control, more focus on equality.

adam smith

an economist known as the father of modern economics who supported free markets and competition

free enterprise

an economic system where individuals and businesses can own property, start businesses, and make their own economic choices

Laissez-Faire

the idea that the government should have little interference in the economy

property

anything a person or business legally owns, such as land, a house, or equipment

voluntary exchange

when buyers and sellers freely agree to trade because both expect to benefit

privatization

transferring a government-owned business or service to private ownership

nationalization

transferring a privately owned business or industry to government ownership

economic goals

the main thing an economy tries to achieve, such as economic freedom, efficiency, equity, security, stability, and economic growth

comparative advantage

when a country can produce a good or service at a lower opportunity cost than another country

absolute advantage

when a country can produce more of a good or service using the same amount of resources

protectionism

people favor trade barriers to protect domestic industries

• believe that too much trade is actually harmful to the country

• limit imports

tariff

• tac on imported goods

• protective tariff: high tariff to protect less efficient domestic industries

quota

• used when an import is priced so low that a tariff still might not protect a domestic product (product produced in country)

• increases the price of the import by limiting the supply

• a limit on amount of something that can be imported

free trade

• result in economic growth

• created an efficient use of resources

• consumers love this

• increases variety of goods

• can hurt and help businesses

• reduces conflict between nations (one of the biggest argument for free trade)

NAFTA/USMCA

a trade agreement between the U.S., Canada, and Mexico that reduces trade barriers, USMA replaced NAFTA in 2020

WTO (World Trade Organization)

an organization that creates international trade rules and helps resolve trade disputes

trade surplus

when a country exports more than it imports

trade deficit

when a country imports more than is exports