Chapter 1 Flashcards
What is economics?
The branch of knowledge concerned with the production, consumption, distribution of goods and services, and the transfer of wealth
Simpler definition for econ?
The study of oeople and the choice they make
What are the two parts of economics?
Macro and micro economics
What are microeconomics?
The study of individuals, households, and companies behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals w individual and economic issues
What are Macroeconomics?
The branch of knowledge that studies behavior of the economy as a whole (city, state,nation) focuses on aggregate changes in the economy such as unemployment, growth rate, gross domestic product, and inflation
What is scarcity?
The condition that results from society not having enough resources to produce all the things people would like to have (wants and needs)
What are the three choices/questions of scarcity?
What to produce? How to produce? For whom to produce?
What is a need?
Basic requirement for survival
What is a want?
Something we would like to have, but is not necessary for survival
What are the two types of economic products?
Goods and services
What are goods?
A useful tangible item (physical) that is used to satisfy a need or a want
Four types of goods
Durable good- an item that lasts 3 or more years when used regularly
Nondurable good- last fewer than 3 years when used regularly
Consumer good- goods bought and used by individual consumers
Capital good- a tool ot good used to produce other goods
What are services?
Work or labor performed by someone
Difference between goods and services?
Goods are tangible (physical) and services are not
What is value?
The monetary worth of a good or service
What determines value?
The cost that someone will pay for something
What is the paradox of value?
A contradiction between the high values of a non essential items and a low value of an essential item
Who is adam smith?
Father of capitalism- in his book the wealth of nations argued that for something to have value it must be scarce and have utility (worth)
What is the solution of the paradox of value?
Scarcity and utility are two factors that determine value.
What is wealth?
The accumulation of products that are tangible, scarce, and have utility
What makes up a nation’s wealth?
All tangible items
Are goods and services counted as wealth?
Goods are counted, services are not
Is anything free?
No, because resources are limited everything has a cost, even when it seems free
TINSTAAFL
There’s no such thing as a free lunch
What are the basic economic choices faced by all societies?
- What to produce? Decision is made either by the gov. (North Korea) or by the consumer (USA)
- How to produce? More automated machines, robots, or more workers? Must weigh the cost.
- For whom to produce it? Housing? Low income or high income?
Our economy is made up of what two broad groups?
Producers and Consumers
What is a producer?
A person, company, or country that makes, grows, or supplies goods or commodities for sale
What are the four factors of production?
- Land- natural resources
- Capital- money, tools, equipment, machinery, etc
- Labor- people and workers
- Entrepreneurs- individual risk takers
Are these four factor of prod necessary?
Everything that is made requires these 4 factors!
What is opportunity cost?
The cost/value of the next best alternative given up
Everything that we make has…
Tradeoffs: alternative choices that must be given up in favor of the choice we select (all the other alternatives)
What is a consumer?
A person who purchases goods and services for personal use
What are consumer rights?
Protect the against producers
What are the 5 consumer rights?
The right to... Safety Be informed Choose Be heard Redress
What is consumerism?
1960s
This social movement was an attempt to educate buyers about purchases they make and demand better and sager products.
