Details Title: Ch 1 Econ Test Description: Economics chapter 1 Total Flash Cards: 28 Created: 09/23/2009 18:10:12		New Users: To study from this flashcard set, or to create your own your own study flash cards, REGISTER HERE. Existing Users: CLICK HERE. Additional Economics Flashcards
Cards in this set: Term The 3 Basic economic questions Definition a. What goods should be produced? b. How should the goods be produced? c. Who should receive the goods/services produced? Term Economics Definition The study of how people and societies use limited resources to satisfy their unlimited wants. The study of scarcity and choice Term Goods Definition Tangible items of value, things we can see or touch Ex: scissors, medicines, textbooks Term Services Definition Intangible things that have value, cannot be seen nor touched Ex: haircuts, medical care, education Term Consumption Definition The act of buying final goods and services Term Four factors of production Definition 1. Human Resources - people whose efforts and skills go into the production of goods and services. Productivity - the amount each worker produces in a specified time 2. Natural Resources - materials obtained from the land, sea, and air Standard of Living - quantity and quality of goods and services that are available to an individual or society Capital Resources - the machines, tools, and buildings that we use to produces goods and services Capital Formation - the production of capital goods Entrepreneurship - entrepreneurs create new enterprises or improve existing ones Term Trade-offs Definition Takes place when one thing is given up in order to obtain something else Term Opportunity Costs Definition The trade-off of the value of one good service for the value of another Term Marginalism Definition The usefulness of adding one more item to the production of a product or service Term Traditional Economic System Definition Decisions about WHAT to produce; How to produce; and to WHOM are a matter of custom and tradition; career is usually determined at birth Term Command Economy Definition WHAT, HOW, and WHO are decided by a central authority, usually the government Term Market Economy Definition WHAT, HOW, and WHO are made by individuals and business (like we have in the United States) Term Microeconomics Definition The study of the effects of economic forces on individual parts of the economy, such as business firms, households, and workers (businesses) Term Macroeconomics Definition The study of the impact of changes on the economy as a whole (the big picture) Term Ceteris Paribus Definition All things being equal; enables observers to focus on one or two variables while, at the same time, recognizing that other variables exist Term Medium of exchange Definition Money is only worth what people are willing to pay for it Ex: a woodcutter who wants shoes does not have to find a shoemaker who wants wood Term Standard of Value Definition Ex: a book that costs $12 = 20 candy bars at $0.60 each Term Store of Value Definition Money can be saved for future use Term Principles of US Economic System Definition 1. Free Enterprise - people can enter any business they choose 2. Private Property - right to won and use property 3. Profit Motive - the willingness of entrepreneurs to risk financial loss by organizing and launching a business enterprise; the desire of business owners to earn the greatest profits Consumer Sovereignty - the need to give customers what they want; the consumers have to choose which goods and services to buy Competition - rivalry between sellers; the rivalry for goods and services among buyers and sellers Term Specialization Definition A situation in which each nation, region, or firm produces a narrow range of products or services Term Innovation Definition New ways of doing things Term Comparative Advantage Definition The principle that a nation should specialize in the production of those goods and services in which it is most efficient, and trade its surplus goods and services for the things it needs Term Circular Flow of Economic Activity Definition The stream of funds that is constantly passing back and forth between the public and the businesses of the country Term The Role of Prices Definition Prices affect WHAT goods and services will be produced Prices affect HOW goods and services are produced Prices affect WHO will receive goods and services Term Adam Smith Definition 2 revolutions of 1776: American Revolution and Capitalism Published "The Wealth of Nations" Thinks that nations can produce more by Laissez-faire (government stays hands off of business) Term Advantages of the Market System Definition 1. The most efficient of all economic systems 2. More sensitive to consumer demand than other economic systems 3. Provides the most freedom for individuals and business firms, and least direction and control by government 4. Rewards those in accordance with the value the economy places on their contribution Term Disadvantages of the Market System Definition 1. Does not prove all of the goods and services needed by society 2. Does not adequately provide for the needs of all the people 3. Likely to experience periods of expansion and contraction of business activity 4. The market system cannot account for many harmful costs of doing business Term Economic Rationality Definition Economists base their ideas off the fact that people are rational, however, some people are not and that is why they have choice and different things are given different values