Economics Theme 1: Scarcity and Opportunity Cost study guide
Topic 1: Economics and Choices
Economics: A social science that studies how people, acting individually, and in groups, decide to use scarce resources to satisfy their needs and wants.
Scarcity: An inequality that exists between wants and the resources available to satisfy them.
Incentives: A positive rewards that results from making a choice or behaving in a certain way
Economic reasoning: Making rational choices by weighing costs and benefits
Opportunity cost: The highest valued alternative given up as a result of making a choice
How people decide to use scarce resources is the best description of economics
Topic 2: People’s needs and wants
Needs: An item or service you must have in order to live (ex: food, water)
Wants: An item or service that you would like, but that you can live without (ex: a new phone)
Voluntary exchange: Buyers and sellers willingly trade goods, services, effort, and money
Specialization: When each trading partner focuses on producing goods or services within a limited area of expertise
Topic 3: Consumers and Self-Interest
Self-Interest: To focus on actions that will lead to the most personal benefit
Consumer: A person who buys goods and services
Saver: One who prefers to save income for future use
Income: Money received in the form of wages, salary, rent, interest, or gifts
Economy: The combined effect on a regions wealth, resources, production, and consumption
Self interest vs. selfishness
You look for ways to help yourself and others
You look for ways to help yourself w/o thinking of others
You create win win situations
You create win-loss situations
Topic 4: Production of Goods and Services
Free enterprise: A system in which economic decisions are made in markets by people and businesses
Revenue: Money earned from sales
Profit: When business owners earn more than what it costs to produce the goods that you need and want
Four factors of production: The resources needed to make goods and services
Loss: When a business pays more in expenses than it makes in revenue
Incentive: Something that encourages an individual or organization to do something (ex. the grocery store has a buy one get one special)
Disincentive: Something that discourages an individual or organization from behaving in a certain way (ex. a restaurant charging an extra $5 fee for splitting an entree)
Types of products:-)
Shopping: You are looking for the best place to get the goods, usually at a reasonable price
Convenience: Customer product, purchased quickly
Specialty: Looking for something specific, willing to spend more money on the product,
Capital: a physical asset that is used in the production of another product or the delivery of a service (ex: wood to produce tables)
Types of Industrial Products :o
Supplies: Things needed to make the end product (ex. pencils)
Materials: Going to be used “inside of” what you are making (ex, flour and eggs for a cake)
Equipment: An item that will be used to do work (ex. a business’s computers)
Parts: Have undergone some form of processing but not the final product (ex. bolts for the production of automobiles)