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Economics Semester 1
Everything you need to know... hopefully
34
Economics
12th Grade
01/18/2011

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Term
Scarcity?
Definition
society doesn't have enough resources to make everything we want
Term
How does scarcity affect decision-making?
Definition
People try to satisfy near unlimited wants with their limited resources
Term
What is a need? Contrast this with a want.
Definition
A need is the basic requirement for survival whereas a want expresses a need.

[You can need food but want pizza]
Term
TINSTAAFL, what is it?
Definition
There Is No Such Thing As A Free Lunch

Someone's going to have to pay for it even if we think it's "free"
Term
What are the 3 basic questions that need to be answered before making economic choices?
Definition
1) WHAT will you produce?
2) HOW will you produce it?
3) FOR WHOM will you produce it for?
Term
What are factors of production? (not list)
Definition
The resources required to produce the things that we would want
Term
List the 4 factors of production and explain them briefly.
Definition
1) land = natural resources available; anything not man-made
2) Capital = equipment, factories, money [*unique!*]
3) Labor = people's efforts & abilities
4) Entrepreneurs = risk takers that seek profits and does something new w/ existing resources; provide initiative
Term
Why is the factor of production, capital, unique?
Definition
It is a factor of production that is also the result of production.

I.E.- equipment is also the result of production and later helps in production
Term
What is production?
Definition
process of creating goods/ services

only possible with the factors of production
Term
What is Gross Domestic Product (GDP)?
Definition
the dollar value of all final goods/services, and structures produced in a year

measures total output of a nation
Term
What are economic products?
Definition
Goods/services that are useful, relatively scarce and transferable to others
Term
What is a good? a consumer good? a capital good?
Definition
Good = item that's useful and satisfies economic want
Consumer good = intended for final use by individuals
capital good = manufactured items that are used to make other goods/services
Term
what makes a good durable as opposed to nondurable?
Definition
Durable goods last 3+ years when used on a regular basis
Term
What is a service?
Definition
Work that is performed for someone [intangible]
Term
What makes you a consumer? =D
Definition
You're a person who uses goods/services to satisfy wants and needs
Term
What does value refer to?
Definition
The worth that can be expressed in an actual monetary value (i.e.-$3.25)
Term
What is the paradox of value? Use the example of water and diamonds.
Definition
Oddity where some necessities are worth little money but non-necessities are worth a LOT more.

Scarcity itself is not enough to make a value.

25ยข per gallon of water VS $200 diamond ring
Term
Why is utility important in order for an object to have value?
Definition
Items need to be useful and provide satisfaction but it may not be fixed or measurable
Term
Define the concept of wealth.
Definition
It is the accumulation of tangible, scarce, useful, and transferable products

Services cannot be counted b/c they are intangible but it's NOT unimportant
Term
What is this thing called a market?
Definition
A location where buyers & sellers can exchange economic products

[local, regional, national, global, or cyberspace]
Term
Individuals earn their incomes in factor markets. What are these FMs?
Definition
markets where productive resources are bought and sold
Term
What are product markets?
Definition
Producers sell their goods/services to consumers
Term
[image]
Definition

Did that help?

You might want to go back and study the circular flow a bit more

Term
What defines economic growth?
Definition
It occurs when a nation's total output of goods/services increases over time
Term
What does the term productivity describe?
Definition
the measure of the amount of output produced by a given amount of inputs in a specific period of time
Term
How can division of labor improve productivity?
Definition
Work is setup so that workers do less tasks than before but the specialization results in higher productivity because of efficiency
Term
What is human capital?
Definition
the sum of all skills, abilities, health, and motivation of people

Businesses can invest with training programs that improve skill and motivation

Gov't can invest in such in providing education and health care
Term
Give an example of a tradeoff.
Definition
Tradeoffs are alternative choices

Having $40 and needing to choose between concert tickets, CDs, a CD player, or clothing.

Analyze your costs -- even if they're not monetary!
Term
What is opportunity cost?
Definition
When you choose to buy one thing, it's the cost of the next best alternative use of money, time and resources.

If you spend $10 on magazines, the opp. cost is everything else you could have bought with the $10
Term
Cost benefit Analysis
Definition
way of pondering a problem where you compare the costs and benefits received
Term
Standard of Living
Definition
quality of life based on possession of necessities/luxuries that make life easier
Term
Traditional Economy
Definition
Nearly all economic activity comes from ritual/ habit/ tradition. It also defines social behavior and ppl aren't free to decide what they would want/have

Adv: everyone knows the role to play
Disadv: discourages new ideas thus lower standard of living
Examples: indigenous groups
Term
Command Economy
Definition
Central authority makes the economic decisions

Adv: can change economic direction quickly + health/public services available to all for little/no cost
Disadv: not meet wants of consumers + no incentive to work hard + needs large decision making bureaucracy + inflexible in day-to-day problems
Examples: N Korea, former Soviets, Cuba
Term
Market Economy
Definition
People/firms make the economic decisions and markets allow ppl to come together in order to exchange goods/services

Examples: US, Canada, Japan, GB
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