What are needs?
Things necessary for survival
What is the situation that exists when there are not enough resources to meet the wants of the people
Scarcity
The study of how people choose to use scarves resources to satisfy their wants
Economics
Three questions that scarcity leads to
What will be produced?
How will it be produced?
For whom will it be produced?
Four factors of production
- Land - all natural resources that are used to produce goods
- Labor - all human time and effort that goes into making products
- Capital - all resources made and used by people
- Entrepreneurship - combination of vision skill ingenuity and willingness to create and run a new business
What is real capital
Money that is made from goods and services
Human capital?
The knowledge and skills gained through experience
Benefits offered to encouraged people to act in certain ways
Incentives
Making decisions according to what you believe is the best combination of cost and benefits
Economize
What is opportunity cost?
Anything you give up to get something else
Cost benefit analysis?
The practice of examine the cost and expected benefits of choice
What is marginal cost?
Additional cost of using one more unit of a product
Additional satisfaction from using one or more unit of product
Marginal benefit
Production possibilities curve?
A graph used to show the impact of scarcity of an economy
Four assumptions made for the PPC
- Resources are fixed
- All resources are fully employed
- Only two things can be produced
- Technology is fixed
What is efficiency?
The condition in which economic resources are being used to produce the maximum amount of goods And services
The condition in which Econ resources are not being used to their full potential
Underutilization
What are Statistics
Info in numerical form
What is a graph
A visual representation of numerical relationships
Microeconomics?
Study of individuals, families, and businesses in an economy
Macroeconomics is…
Study of economy as a whole and is concerned with large-scale economic activity
A way of describing and explaining economics as it is not as it should be
Positive economy
Way of describing and explaining what Econ behavior ought to be not what actually is
Normative economy
Who published the wealth of nations?
Adam smith
What idea did the wealth of nations support?
Free trade
Three basic types of Econ systems
Traditional, command, and market
What are wants?
Desires that can be satisfied by consuming a good or service
Advantages of traditional economy
Produces what best ensures it’s survival
The method of production stays the same
Distribution is based on customs and traditions
Disadvantages of traditional economy
They resist change
People are restricted from what the want to do
They have a much lower standard of living
When a central government makes all economic decisions
Centrally planned economy
What is socialism?
An Econ system in which the gov owns some or all of the factors of production
More extreme form of socialism; no private ownership of property and little or no political freedom
Communism
Who wrote communist manifesto? And what did he want?
Karl Marx; he wanted a society in which there was no economic classes
Advantages of command economy
Seeks to provide for everyone
They can produce things that may not make money in a market economy
Disadvantages of command economy
Central leaders have little understanding of local conditions
Workers have no motivation to improve their productivity
There is no private property therefore no reason for people to use resources responsibly
What are private property rights?
The right for individuals and groups to own private property.