What is economics?
The study of how people use limited resources to meet unlimited wants.
“There’s no such thing as a free lunch”
Occurs when there are limited quantites of resources to meet unlimited needs or desire. (always exists)
Scarcity
Occurs when producers will not or cannot offer goods or services at current prices. (temporary)
Shortages
Factors of production also means…
resources
All natural resources that are used to produce goods and services.
Land
Any effort a person devotes to a task for which that person is paid. Wages and salaries are paid.
Labor
Any human made resource that is used to create other goods and services.
Capital
What is physical capital?
Used to creat machines and tools
What is human capital?
Education and knowledge
What is an entrepenuer?
A person who brings together the land, labor, and capital and starts a business. Can be considered a 4th factor of production.
The alternitive that we give up whenever we chooses one curse of action ver others.
Trade-off
Most desirable alternitive given up as a result of a decision
oppertunity cost
When you decide how much more or less to do.
thinking in the margin
What is a production possibility
A graph that shows alternitive ways that an economy can use its resources
How is efficiency represented on the graph?
any point on the line
What is the Law of Increasing Oppertunity Cost?
The amount of other products that must be forgone (forgotten) to obtain more of any given product
resources are not being used to their fullest capability
underutilization
Alternitives given up when a decision is made
trade-off
The highest valued trade-off is called…
oppertunity cost
A decison when you add one unit or subtracting one unit.
Thinking at the margin
This shows the alternitive ways in which an economies resources can e used.
production possibility curve
Pionts insode the production possibilities curve reflects a _________ of resources.
underutilization
Any line inside the production possibility curve represents…
efficiancy
PIonts outside of the production possibility line represent….
growth.
To gain economic groth we either need to gain more resources or more _______
technology
We must give up up resources in order to produce another product because the resources are _______
limited
If there is a shortage of a produc there is to much ______ and not enough supply of the product.
demand
What are the 5 economic goals?
Freedom, efficiency, security, growth, and equity
What is the goal for economic freedom?
Economic freedom means that people are free from government intervention and the production and distribution of goods and services.
What is the goal of economic efficiency?
This means that the products that people demand are being produced at a low cost. This also means supply equals demand.
What does the goal of economic security mean?
Provides safety nets in the economy like unemployment insurance or disaster relief programs.
What is the goal of economic growth mean?
This means that the standard of living is increasing because the economy has more goods and services available. This goal is achieved by new technology or new resources.
What is the goal of economic equity?
It means that there is a fair distribution of wealth.
What does the circular flow diagram show?
This diagram illustrates efficency because it shows how the markets are self-regulating without government help.
What theory says that people look for their own self interest?
The Invisible Hand Theory
What is the regulating force that keeps prices low?
Competition
Why don’t centrally planned economies work well?
Lack of motivation
why can’t centrally planned economy’s meet people’s needs and wants?
because the government owns or controls the factors of production and controls the output
which country has the most economic freedom?
Hong Kong
what does Hong Kong lack?
safety net programs because there is freedom
what are the three advantages of the free market system?
economic growth, economic freedom, and economic efficiency
what are the disadvantages of a free market system?
Equity and security
why is the US economy a mix system?
because it has a large amount of economic freedoms but the government does intervene to help make the company more efficient
what happens when the supply and demand are equal and then economy?
The economy is efficient
what what makes companies lose motivation to be efficient with the use of resources?
government controlling economy