Econ unit 1 Flashcards
goods
a real tangible item that has a use and satisfies a want (ex. food)
services
work that is performed by someone (ex. job)
4 factors of production
land, labor, capital, entrepreneurship
3 Fundamental questions of economics
what will be produced?
how will it be produced?
how will output society produces be distributed?
what is economics and why do we study it
study of choices that we and the government make. helps people become better decision makers, understand how our economy works, make informed decisions about political leaders
microeconomics
the part of economics concerned with single factors and effects of individual decisions
paradox of value
prices for goods are based on marginal utility rather than total utility (water is more useful than diamonds, but we’d spend more on diamonds)
purpose of circular flow diagram
shows exchange of money for goods and services in our economy
scarcity and how it impacts lives
when society doesn’t have enough resources to produce what we want. causes high prices for things and people to not always have the goods they want
opportunity cost and how it’s measured
your next best option when making a choice. measured by productions possibilities curve frontier
economic system
the way in which a society provides for the wants and needs of its people
traditional economy
allocation of scarce resources and other economic activities are based on ritual, habit, or custom (ex. tribal or indigenous)
command economy
central authority(government/leader) makes all economic decisions (ex. North Korea)
market economy
supply and demand determines what is produced (ex. U.S)
role of government in a command economy
decide what, how, and for whom to produce for. And decided about products and what people need
role of consumers in American free enterprise
rule the economy, business make what consumers want and if they can’t then they die
role of entrepreneurs in American free enterprise
the spark, give cheaper/high quality jobs
role of government in American free enterprise
protector, provider, and regulator, oversees industries, and gives roads/schools/parks etc.
3 main goals of economic system
stable prices, low unemployment, economic growth
capitalism
private citizens and businesses own/use factors of production
socialism
government owns and controls some of the factors of production
communism
all factors of production are “collectively” owned and controlled by the government
benefits and drawbacks of sole proprietorship
(+) owner receives all profits, only once are profits taxed, (-) unlimited liability, less legal protection
benefits and drawbacks of partnership
(+) both partners have equal responsibility/liability, (-) profits shared with everyone
benefits and drawbacks of corporation
(+) protected by law, limited liability, (-) more expensive, double taxation, need protection by law
2 types of mergers
vertical: firms that are involved in different stages of production
horizontal: firms that produce same products join up
multinational coporation
company that has operations throughout the world (ex. apple)
