economis studuidy guide

1. Four Factors of Production (with examples):

• Land: Natural resources (e.g. water, oil, trees).

• Labor: Human work (e.g. teacher, factory worker).

• Capital: Tools and machines (e.g. hammer, computer).

• Entrepreneurship: People who start businesses (e.g. Elon Musk starting Tesla).

2. Difference Between Goods and Services:

• Goods are physical items (like a phone or sandwich).

• Services are actions done for others (like haircuts or teaching).

3. Scarcity and Economic Decision Making:

Scarcity means limited resources. Because we can’t have everything, people and governments must make choices about what to produce, buy, or save.

4. Micro vs. Macroeconomics:

• Microeconomics studies small units like individuals or businesses.

• Macroeconomics looks at the big picture—entire economies and global trends.

5. GDP (Gross Domestic Product):

GDP is the total value of all goods and services a country produces in a year. It shows how healthy a country’s economy is.

6. Entrepreneurs in Capitalism:

Entrepreneurs start businesses, create jobs, and take risks to make profits, driving innovation and growth in the economy.

7. Four Characteristics of a Capitalist Economy:

• Private property rights

• Economic freedom

• Profit motive

• Competition

8. Importance of Competition and Profit Motive:

Competition lowers prices and improves quality. The profit motive encourages people to work hard and take risks to earn money.

9. Adam Smith:

A Scottish economist who wrote The Wealth of Nations and supported capitalism and the idea of a free market.

10. Laissez-Faire Economics:

This means “let do” in French. It’s the idea that government should stay out of the economy and let businesses run freely.

11. Market vs. Command Economy:

• Market: People decide what to make, buy, and sell.

• Command: Government makes those decisions.

Think of the 3 economic questions: What to produce? How? For whom?

12. Proletariat & Bourgeoisie:

• Proletariat: Working class

• Bourgeoisie: Wealthy class who own businesses and capital

13. Socialist Economy:

The government owns key industries. Goals: equality, free education and healthcare, less income gap.

14. One Pro & Con of Socialism:

• Pro: Free or low-cost healthcare and education

• Con: Higher taxes and less incentive to work hard

15. Communism vs. Socialism:

• Communism: Government owns everything, no private property

• Socialism: Mix of government and private ownership

Communism is more extreme.

16. Karl Marx:

German philosopher who wrote The Communist Manifesto and created the idea of Communism.

17. Mixed Economy (with Examples):

A mix of capitalism and government control (e.g. U.S., France, Canada). There’s both private business and government services.

18. Two Command Economies Today:

• North Korea

• Cuba

1. Goods – Physical items people buy (like clothes, food, or phones).

2. Services – Actions or work one person does for another (like haircuts or car repairs).

3. Factors of production – Resources used to make goods and services: land, labor, capital, and entrepreneurship.

4. Entrepreneur – A person who starts and runs a business.

5. GDP (Gross Domestic Product) – The total value of everything a country makes in a year.

6. GDP per capita – The average amount each person in a country contributes to the GDP.

7. Standard of living – The level of wealth and comfort people have in a country.

8. Capitalism / Free Enterprise – An economic system where people own businesses and compete freely.

9. Consumer sovereignty – Consumers (buyers) control what gets made by choosing what to buy.

10. Profit motive – The desire to make money, which drives businesses.

11. Voluntary exchange – People freely trade goods and services with each other.

12. Laissez-faire economics – The idea that the government should not interfere with the economy.

13. Market economy – An economy where people and businesses decide what to make and buy.

14. Command economy – An economy where the government makes all economic decisions.

15. Socialism – An economic system where the government owns some resources and shares wealth more equally.

16. Communism – A system where the government owns all property and makes all economic decisions.

17. Bourgeoisie – The wealthy class who own businesses and land (used in communism).

18. Proletariat – The working class (used in communism).

19. Mixed economy – An economy that blends elements of market and command economies.

20. Microeconomics – The study of small economic units like individuals and businesses.

21. Macroeconomics – The study of large economic systems like a whole country’s economy.

22. Scarcity – When there are not enough resources to meet everyone’s wants.

23. Opportunity cost – What you give up when you choose one thing over another