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What is economics?
the study of how people try to satisfy unlimited & competing wants with limited resources
What is scarcity?
not having enough resources to produce all things people want
What is a need?
basic requirement (food/water, clothing, shelter)
What is a want?
something we would like to have
What are the three basic economic questions?
What to produce (what should we make)
How to produce (hire workers or use machines?)
For whom to produce (who will receive products?)
What are the 4 resources required to produce things?
land: natural resources
capital: tools, equipment, machinery, factories
labor: workers
entrepreneurs: people who take risks by starting a business
all four of these factors must be present to produce things
What is a good?
a useful, tangible, item
What is a capital good?
manufactured good that produces other goods/services (computer, oven)
What is a consumer good?
intended for individual use
What is a durable good?
lasts 3 years or more on a regular basis (computers, cars)
What is a nondurable good?
lasts less than 3 years (food)
What is a service?
work performed for someone (haircut, repairs, teachers, doctors, lawyers, etc.
What are economic qualities of goods and services?
are useful, relatively scarce, transferable, and command a price
What is the paradox of value?
some necessities (water) have low value, but non-necessities (diamonds) have high value
What must something have for it to have value?
it must have utility (capacity to be useful and satisfactory) AND be scarce
What is wealth?
accumulation of products
What is a market?
location of buyers & sellers
What flow does economic activity have?
circular flow
What is economic growth measured by?
an increase in productivity and human capital (skills, abilities, health, etc.)
What is division of labor?
organizing work into parts
What is specialization?
perform certain tasks more efficiently than others (Ford assembly line)
What is the US economy?
interdependent
What is an interdependent economy?
we rely on others, they rely on us for goods and services
What does every decision have?
trade-offs (alternatives) and opportunity costs
What is an opportunity cost?
cost of next-best alternative
What are the two ways of making a decision?
economic model
cost-benefit analysis
What is the economic model?
equation, graph, etc.; often based on assumptions
What is cost-benefit analysis?
compare costs of an action to the benefits received; making a grid
What Scottish economist discovered the paradox of value in 1776?
Adam Smith
What is the literal meaning of the word "entrepreneur?"
“to do something” “risk-taker” “to undertake”
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Flashcard (59)