Chapter 1 Study Guide Flashcards
The situation in which some necessities have little value while some non-necessities have a much higher value is known as _____
Paradox of Value
Manufactured goods needed to produce other goods and services are called _____
Capital Goods
To arrive at an economic decision, a decision-making grid may be used to evaluate _____
Alternative Choice of Action
Division of labor is a characteristic of _____
Assembly Line Production
The study of economics is important because it enables us to _____
Become Better Decision Makers
The dollar value of all final goods and services and the most comprehensive measure of a country’s total production output is _____
Gross Domestic Product (GDP)
A popular model used to illustrate the concept of opportunity cost is _____
The Production Possibilities Frontier
An economy at its production possibilities frontier is operating _____
At Full Potential
The money used to buy the tools and equipment needed for production is known as _____
Financial Capital
Actions in one part of the country or world that have an economic impact on what happens elsewhere are examples of _____
Economic Interdependence
_____ describes the concept that everything we do has a cost
TINSTAAFL
WHAT, HOW, and FOR WHOM to _____ are the three basic economic questions
Produce
The _____ include land, labor, capital, and entrepreneurs
Factors of Production
_____ is a key measure of a nation’s economic health
Gross Domestic Product
The study of _____ helps all of us to become more informed citizens and better decision makers
Economics
A _____ grid can be used to evaluate alternatives
Decision-Making
The opportunity cost of doing something is the next best alternative, or _____, that you give up
Trade-off
A production possibilities frontier shows the various possible combinations of output than can be produced when all _____ are fully employed
Resources
When economic growth takes place, the _____ shifts outward, showing that more products are produced than before
Production Possibilities Frontier
The study of economics helps people make better _____
Decisions
_____ is worth that can be expressed in dollars and cents
Value
_____ is the study of how people try to satisfy their needs and wants through the use of limited resources
Economics
_____ are the tools, equipment, machinery, and factories used in the production of goods and services
Capital
_____ is the condition of not having enough resources to produce all the things people want
Scarcity
_____ is the cost of the next best alternative use of money, time, or resources when one choice is made rather than another
Opportunity Cost
_____ is the sum of those economic products that are tangible, scarce, useful, and transferable
Wealth
_____ includes people with all their efforts, abilities, and skills
Labor
_____ are the alternative choices made by consumers in the marketplace
Trade-offs
_____ is the quality of life based on the possession of the necessities and luxuries that make life easier
Standard of Living
_____ is the item that is economically useful or that satisfies an economic want
Good
What factor of production would Adam Smith be most likely to identify as the source of a nation’s wealth? Do you concur? Explain.
In The Wealth of Nations, Adam Smith argued that the abilities and skills of a nation are its sources of wealth. In other words, he would likely identify labor or entrepreneurship rather than land or capital as the most important factor of production
How is it possible for a good to be both a capital good and a consumer good?
Some goods are used by both consumers and by companies to produce more goods. An example of this might be a small tractor. Used in a home garden, it is a consumer good, but used on a small farm, it is a capital good
Why is prediction an important element of economics?
People and society often need to know how their decisions will affect the well-being of people and businesses in the future. Prediction enables people to evaluate the consequences of different choices
Why is cost, measured in dollars alone, an insufficient measure of value? What concept do economists use to better evaluate a decision? Why is it important?
You cannot put a monetary value on everything. You can, however, identify one or more things which must be given up in order to acquire or achieve something else. This is the concept referred to by economists as opportunity costs. The concept encourages a more comprehensive analysis if every decision
What is the difference between a factor market and a product market? Explain how these markets are dependent on each other.
Individuals earn their income in factor markets and spend their income in product markets. Businesses receive payments in product markets when they sell goods to individuals. This income pays for land, labor, and capital bought in the factor markets. These resources are then used to manufacture additional products that are sold in the product markets
Why is the study of economics important, even for people who are not going to be business owners or investors?
Everyone in some way is involved in economics. Employees are involved in the economic process, which directly affects their wages and employment possibilities. Voters are often asked to vote on issues affecting the economies of their communities. Consumers are affected by the factors of production that determine the prices of goods and services
