Unit 9 - Basics of Economics

Scarcity

The inability to satisfy all wants and needs at the same time (all resources and goods are limited)

What are the 3 resources

Natural, Capital, Human

Natural Resource

found on earth (ex. Water, oil, sunlight)

Capital Resource

any tools, buildings (spaces), and equipment (to help produce things)

Human Resource

Labor, ability to do work

Entrepreneurship

people who take risks with an incentive to earn a profit.

Choice

electing an item or action from a list (possible alternatives)

Opportunity cost

What is given up when a choice is made

Production

combining the factors of production (human, natural, capital, entrepreneurship)

Consumption

use of goods and services; consumer preferences and price determine what is purchased and consumed

What are the 4 types of economies?

Traditional, Command, Mixed, Free market

Traditional

based on custom and historical precedent (earlier even or action); regardless of ability and potential, people often perform the same work as their parents or grandparents

Command

central ownership by government; lack of consumer choice, government controls where to work, how much salary etc

Mixed

Includes the US; less government involvement (the government still helps), more choice. Mixture of command and free market (more free market)

Free Market

private ownership of property/resources; profit motivated, lots of competition, less government involvement (mostly not at all)

Consumer sovereignty

money is like voting (consumers choose what they wanting more of to businesses)

Demand

amount of goods and services that consumers are willing to buy at different prices during different times

Law of Demand

consumers buy more at lower prices

Equilibrium price

the point where supply and demand meet

Proprietorship

one owner who takes all risks and profits

Partnership

two or more owners who share all risks and profits

Corporation

Act as a legal entity regardless of the number of owners (they all share profits).

Liability

risk of loss

the P in “PACED” means

P = State the PROBLEM

the A in “PACED” means

A = List the ALTERNATIVES

the C in “PACED” means

C = Identify the CRITERIA

the E in “PACED” means

E = EVALUATE the alternatives based on the criteria

the Di n “PACED” means

D = Make a DECISION