Econ Unit 1 Flashcards
What are goods?
Goods are real tangible items that have use and satisfy a want. Examples: Pencils, papers, and toys
What are services?
Work that someone performs. Examples: Therapy sessions, babysitting, and surgery.
What are the 4 factors of production?
Land, Labor, capital, and Entrepreneurship
What are the 3 fundamental questions of economics?
- What goods and services should be produced to meet consumers’ needs?
- How should they be produced, and who should produce them?
- Who should receive goods and services?
What is economics?
It’s a social science with stakes in many other fields and the study of scarcity and its implication for the use of resources, production of goods and services.
Why do we study economics?
We study it to determine the most logical and effective use of resources to meet private and social goals.
What is microeconomies?
It’s the part of economics concerned with single factors and the effects of individual decisions.
What is the “paradox of value”?
The contradiction is that although a necessity (such as water) is more useful for survival, and luxury goods have a higher market price.
What is the purpose of the Circular Flow Diagram?
The basic purpose of the circular flow diagram is to understand how money moves within an economy.
What is scarcity?
it’s limited goods or services that people desire to satisfy their needs.
How does scarcity impact our lives?
It influences the free market through supply and demand, leading to inflammation and raised prices.
What is opportunity cost? How is it measured?
It’s the loss of potential gain from other alternatives when one alternative is chosen. Can be measured on an opportunity cost graph.
What is an economic system?
When societies of governments organize and distribute available resources, services, and goods across a geographic region or country.
Traditional economy
Customs and traditions are more important than money. Example: Tribes in brazil.
Command economy
Production, investment, prices, and incomes, are determined centrally by a government . Examples: Cuba, North Korea, Nazi Germany
Market economy
An economic system where two forces, known as supply and demand, direct the production of goods and services. Examples: United States, Japan, UK
What is the role of the government in a command economy?
The government controls and steers major aspects of economic production. They decide the means of production and own the industries.
What role do entrepreneurs play in American free enterprise?
They spark free enterprise, provide jobs, provide cheaper and higher quality goods, and seek out risks and profits.
What role do consumers play in American free enterprise?
Consumer sovereignty: consumers rule the economy if they don’t like a product then they don’t have to buy it, forcing businesses to innovate and develop new products.
What role does the government play in American free enterprise?
It protects, provides, and regulates American free enterprise.
What are the three main goals of an economic system?
STABLE PRICES; Prevents inflammation
LOW UNEMPLOYMENT: The more people are employed, the better they can support themselves.
ECONOMIC GROWTH: The economy must grow to satisfy our changing needs and wants.
What is capitalism?
An economic system where private citizens and businesses own and use the factors of production.
What is socialism?
Political and economic systems where the government owns and controls some of the factors of production.
What is communism?
A political and economic system in which all the factors of production are collectively owned and controlled by the government.
What is a sole proprietorship? What are the pros and cons?
One-person business, is the most basic form of business.
PRO: No need to file separate taxes, no partners
CON: Responsible for debt, less likely to get loans
What are partnerships? What are the pros and cons?
A business that has or more co-owners with a partnership agreement.
PRO: Easy to structure a business, less paperwork
CON: Responsible for debt, personal disagreements can destroy the company.
What is a corporation? What are the pros and cons?
A business entity that exists independently of its owners reduces the owner’s liability risk.
PRO: Banks are more willing when giving loans, and can exist even when owners leave.
CON: Double taxation, more paperwork, IRS watching closely
What are the two types of mergers that can happen with businesses?
Horizontal Merger: Competing companies merge, they sell the same products: t-mobile and Sprint.
Vertical Merger: A merger of companies with different products, they sell different products: AT&T and Legos
What is a multinational corporation?
A company that operates in its home country, as well as in other countries around the world. Example: Toyota.
(Test question) Doctor’s Office and law firms are examples of…
A partnership
