Economics Unit 1 Flashcards
What is the study of economics?
the study of the production, distribution, and consumption of goods and services + the choices people make when they are faced with scarcity
What is scarcity? Give a real world example
the condition that results from society not having enough resources to produce all the things people would like to have
ex: diamonds are scarce which makes them so rare and valuable
What is choice? Give a real world example
people’s decisions about sharing and using scarce resources
ex: I really want to go on holiday and I would like a new car. I do not have the money to do both, so I must decide which I would like to do the most.
What is utility? Give a real world example
the capacity to be useful and and provide satisfaction
ex: the value customers receive from the newest iPhone
What is value? Give a real world example
worth that can be expressed in dollars and cents
ex: the newest iPhone costs $1000
What is opportunity cost? Give a real world example
the cost of the next best alternative use of money, time, or resources when one choice is made rather than another due to scarcity
ex: you have to decide on going to a concert or going camping. you choose the concert, so camping becomes the opportunity cost
What are the four factors of production?
land, labor, capital, and entrepreneurship
land
includes not only property on which a production plant is built, but all other natural resources
ex: land, forests, water resources, oil
labor
the contribution of human workers to the production process
ex: school teachers, janitors
capital
all the structures and equipment involved in the manufacturing process
ex: machinery storage, transportation - things of value
entrepreneurship
a specific form of labor - a risk-taker in search of profits who does something new with existing resources; brings all 3 other Factors of Production together to make something with them
ex: business owner
what are the four economic systems?
traditional, command, free market, mixed
traditional economy
economic questions are answered by habits and customs (the way it has always been done)
ex: amish, eskimos, pigmies
command economy
the goverment is in complete control of economy
ex: china, vietnam, north korea
free market economy
individual buyers and sellers are in control of economy
ex: US, Western Europe, Japan
