Intro to Econ

Scarcity:

Inability to meet all wants at once

Problems of scarcity:

• Resources are limited
• Good/services exceed ability to produce them
• Forces people to make choice

Resources:

Factors of production used in production of goods/services.

What are the 4 factors of production?

• Natural (land)
• Human (labor)
• Capital
• Entrepreneurship

Choice

Selection of items/actions from a set of possible alternatives

Opportunity cost:

What is given up when choice is made (second-best alternative)

Production:

Combining human, natural, capital, and entrepreneurship resources to make goods/services

What determines what is produced?

Available resources and consumer preferences

Consumption:

Using of goods/services

What determines what is purchased/consumed?

Consumer preference and price

What factor determines the type of economy?

Government involvement

What are the 3 questions of economics

• What will be produced?
• How will it be produced?
• For whom will it be produced?

What are the characteristics of an traditional economy?

• Based on custom/historical precedent
• People do same work as parents regardless of skill

The Amish are an example of what economy?

Traditional

What are the characteristics of a free market economy?

• Private ownership
• Profit motive
• Competition
• Consumer sovereignty
• Individual choice
• No government involvement

The black market is what type of economy?

Free market

What are the characteristics of a command economy?

• Central ownership of resources
• Centrally planned economy
• Lack of consumer choice

A dictatorship is usually what type of economy?

Command

What are the characteristics of a mixed economy?

• Individuals/businesses make decisions for private sector
• Government makes decisions for public sector
• Government involvement is less than command, but more than free market
• Most economies are mixed

How is the government involved in a mixed economy?

Rules and regulations