Economics Unit Review Flashcards

Vocabulary flashcards covering core economic terms, concepts, factors of production, economic systems, indicators, and the business cycle from the economics review document.

Scarcity

The finite amount of resources that exists in every economy because available resources are limited.

Need

Something that is necessary to survive.

Want

Something extra beyond what is necessary to survive.

Trade-off

What you give up when choosing one option over another.

Opportunity Cost

The next best option given up when making a decision.

Land

All natural resources found on the planet, such as oil, water, and timber.

Labor

The physical effort put into making goods and providing services.

Capital

Any human-created resource used to produce other goods and services, including knowledge (human capital) or created tools/machines (physical capital).

Entrepreneurship

The process of launching and running a business using new ideas to make a profit while risking one's own money.

Production Possibilities Curve (PPC)

A graph that shows the different combinations of two goods that can be produced using available resources.

Efficiency (on PPC)

Represented by a point ON a Production Possibilities Curve, indicating that all resources are being fully used.

Underutilization

Represented by a point INSIDE a Production Possibilities Curve, indicating that some resources are not being used.

Impossible Combination (on PPC)

Represented by a point OUTSIDE a Production Possibilities Curve, indicating production levels that the economy cannot produce with current resources.

Straight-Line PPC

A Production Possibilities Curve that suggests the opportunity cost is constant and resources are being efficiently used to produce goods.

Three Basic Economic Questions

The core questions every economic system must answer: 1. What are we going to produce? 2. How are we going to produce it? 3. Who does the producing?

Economic Freedom

The ability to make your own economic choices, such as what to buy, sell, or produce.

Free-Market Economy

An economic system based on individual choice, competition, voluntary exchange, and some government regulation.

Socialism

An economic system where the government and people share economic decisions, allowing some private ownership with more government control.

Communism

An economic system where the government controls almost all economic decisions and resources.

Mixed Economy

An economic system that combines a free market with government involvement, where both individuals and the government make economic decisions.

Economic Systems Comparison Table

A comparison chart showing decision-makers and government roles: Free Market (Individuals/businesses; Some regulation), Socialism (Government and people; More government control), and Communism (Government; Government controls the economy).

Market

An arrangement that allows buyers and sellers to exchange goods and services, which can occur in a physical location or online.

Producer Goals

The two basic goals that guide producers: to make as much money as possible and to spend as little as possible.

Consumer Goals

The basic principles guiding consumers: to get what they need or want while spending as little money as possible.

Voluntary Exchange

A transaction in which buyers and sellers freely agree to trade because both sides believe they will benefit.

Specialization

The concentration of the productive efforts of individuals and firms on a limited number of activities to increase productivity.

Income

Money that a person earns, typically from working a job or owning a business.

Fixed Cost

A cost that stays the same even when production output changes.

Variable Cost

A cost that changes depending on how much of a product is produced.

Poverty Problem

A situation where people do not have enough income to afford basic needs, which societies may address through government support like housing.

Adam Smith

An economist who contributed fundamental ideas such as self-interest, the open market system, laissez-faire (some government regulation), and self-regulating markets.

Self-Interest and Competition

Market forces where self-interest drives businesses to make money, while competition encourages them to offer better products and prices to attract consumers.

Economic Growth

A condition occurring when a country's economy produces more goods and services over time.

Gross Domestic Product (GDP)

The total monetary value of everything produced inside a country.

GDP per Capita

The economic value or income produced per person in a country.

Gross National Product (GNP)

The total value of goods and services produced by a country's people and businesses, including those operating outside the country.

Labor Force

The group of people in a country who are working or unemployed but actively looking for work, excluding retirees and non-working students.

Unemployment Rate Formula

Calculated as $\text{Unemployment Rate} = \frac{\text{Unemployed}}{\text{Labor Force}} \times 100$ (e.g., $\frac{1\text{ million}}{10\text{ million}} \times 100 = 10\text{\%}$).

Business Cycle Stages

The four main phases of economic activity: expansion (growing), peak (highest point), contraction (slowing down), and trough (lowest point).

Public Goods

Shared goods provided by governments—such as national defense, roads, or street lighting—because they benefit everyone and are difficult for a single individual to pay for.