Chapter 1 Flashcards
What are Goods ?
Items that are useful and satisfy an economic want. They are tangible and can be classified as consumer/capital and durable/non-durable
What are Services?
Work performed for someone and are intangible.
What do consumers use goods for ?
To satisfy needs and wants.
What is Value ?
A worth expressed in dollars and cents.
What is Utility ?
A goods or services capacity to provide satisfaction which varies the needs and wants of each person.
What is Wealth ?
The accumulation of goods that are tangible,scarce, useful and transferable to another person.
What is the circular flow of economic activity?
The cycle of product markets,individuals, Factor Markets and Businesses.
How does the circular flow work ?
Product markets give goods and services to individuals . Individuals give Land,Capital ,Labor and Entrepreneurship to factor markets. Factor markets buy productive resources to from businesses and businesses give goods and services to product markets. Product markets generate Business income which the businesses then pay the factor markets for resources . The factor market take the income from resources and put it into the individuals , the individuals then put consumer spending into the product markets.
What are Markets ?
Locations/Mechanisms for buyers and sellers to trade. They are classified as local,regional, national , global and cyberspace.
What is a factor market ?
It is where people earn their incomes. Factor markets center on the four factors of production. Land , capital, labor and entrepreneurs.
What is a product Market ?
Where people use their income to buy from producers . Product markets center on goods and services.
What is productivity ?
It is a measure of the amount of output produced by the amount of inputs within a certain time. Productivity increases with efficient use of scarce resources.
How do specialization and division of labor improve productivity ?
They lead to more proficiency and greater economic interdependence.
How does investing in human capital improve productivity ?
When peoples skills abilities health and motivation advance productivity increases.
What does economic growth depend on ?
High productivity .
What are trade-offs?
The alternative choices people face in making an economic decision. A decision making grid lists the advantages and disadvantages.
What is opportunity cost ?
The cost of the next best alternative among a person’s choices . The opportunity cost is the money,time or resources a person gives up or sacrifices to make his final choice.
What is a production possibilities frontier diagram ?
A diagram representing various combinations of goods and services and economy can produce when fully employed.
What is a cost-benefit analysis?
It helps economists evaluate alternatives by looking at each choice’s cost and benefit.
What are alternative possibilities ?
Where production can take place anywhere inside the frontier.
What is a free-enterprise economy ?
Where people and privately owned businesses rather than the government ,to make the majority of the economic decisions.
What is a traditional economy ?
Where roles and economic decisions are made by customs. Like remote tribes . An advantage of this economy is that everyone knows which role to play and everyone knows the what,how and for whom to produce. A disadvantage is that these economies are behind and have a lower standard of living than other societies.
What are command economies ?
Where a central authority determines the WHAT,HOW and FOR WHOM to produce. These economies are communist countries. There are a few advantages like it can drastically change in a short time and basic health and public services are available at little or no cost. Some disadvantages are hard work inst awarded, the bureaucracy delays decisions and little flexibility with day to day issues.
What are market economies ?
The producers determine the WHAT HOW and FOR WHOM to produce. The consumers dollar acts like a vote ensuring that producers continue to bring products and services that consumers want to buy. Advantage: High individual freedom. Disadvantages: Inability to meet every persons basic needs.
