Im so fucked Flashcards
What is economics?
Economics is the study of how people satisfy their needs and wants by making choices
How do economics define scarcity?
Scarcity occurs when there are limited quantities of resources to meet unlimited needs or desires
What are the three factors of production?
LAND: All natural resources that are used to produce goods and services
LABOR: Any effort a person devotes to a task in which that person is paid
CAPITAL: Any human made resource that is used to create other goods and services
ENTREPRENEURSHIP: Human element that combines the factors of production.
What is the difference between a shortage and scarcity?
A shortage can be temporary or long-term, but scarcity always exists.
Which of the following is an example of using physical capital to save time and
money?
building extra space in a factory to simplify production
What is a shortage?
Shortages occur when
producers will not or cannot
offer goods or services at
current prices
Two types of capital
Physical Capital: All human made goods that are used to produce other goods and services
Human Capital: The skills and knowledge gained by a worker through education and experience
Trade offs
Are all the alternative that we give up whenever we choose one course of action over others.
Opportunity cost
The most desirable alternative given up as a result of a decision
Guns vs Butter
The trade offs countries face of military goods vs consumer goods.
Thinking at the margin
When you decide how much more or less to do, you are
thinking at the margin.
Marginal utility
who would pay more for a glass, someone who just drank or someone who is thirsty?
Opportunity cost
the most desirable alternative given up as a result of a decision.
Economists use the phrase “guns or butter” to describe the fact that
A nation must decide whether to produce more or less military or consumer
goods.
A production possibilities graph shows
Alternative ways that an
economy can use its resources.
The production possibilities frontier is the line that shows
The maximum possible output for that economy.
Efficiency
using resources in such a way
as to maximize the
production of goods and
services. An economy
producing output levels
on the production
possibilities frontier is
operating efficiently.
Underutilization
using fewer resources than an
economy is capable of
using
2 ways to grow on the production possibilities graph
- If more resources
become available - If technology improves
then an economy can
increase its level of output
and grow. When this
happens, the entire
production possibilities
curve “shifts to the right.”
Law of increasing costs
States that as we
shift factors of
production from
making one
good or service
to another, the
cost of
producing the
second item
increases.
A production possibilities frontier shows
the maximum possible output of an economy
An economy that is using its resources to produce the maximum
number of goods and services is described as
efficient
The three economic questions
What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
How do societies answer the three economic questions
on their goals,
efficiency,freedom,security
and predictability,equity,growth
and innovation,Other goals
Economic Goals Achieved by a Free Market Economy
Efficiency, growth, freedom, additional goals
The goals of Economic
Equity and Economic
Security are hard to
achieve in a free market
economy T or F
T !
4 Types of Economic Systems
Traditional, Mixed, Market, Command
Why Do Markets Exist?
Markets exist because none of us produces
all the goods and services we require to satisfy our
needs and wants.
What is a market?
an arrangement
that allows buyers and sellers
to exchange goods and
services.
Specialization
is the concentration of the productive
efforts of individuals and firms on
a limited number of activities.
In a free market economy,
households and business firms
use markets to exchange money
and products.
The product market
The market in
which households purchase the
goods and services that firms
produce.
Factor Market
Market in which
firms purchase the factors of
production from households.
Self interest
Self-interest is the motivating force in the free
market.
competition
is the regulating force of the free market.
the invisible hand
The interaction of buyers and sellers, motivated by
self-interest and regulated by competition
Laissez faire
is the doctrine
that government generally
should not interfere in the
marketplace.
In a centrally planned economy
the government
owns both land and capital. The government
decides what to produce, how much to produce,
and how much to charge.
socialism
is a social and political
philosophy based on the belief that
democratic means should be used
to distribute wealth evenly
throughout a society.
communism
is a political system
characterized by a centrally planned
economy with all economic and
political power resting in the hands
of the government.
soviet agriculture
In the Soviet Union, the government created large state-owned
farms and collectives for most of the country’s agricultural
production.
soviet industry
Soviet planners favored heavy-industry production (such as
steel and machinery), over the production of consumer goods.
soviet consumers
Consumer goods in the Soviet Union were scarce and usually
of poor quality.
problems of a centrally planned economy
Centrally planned economies face problems of
poor-quality goods, shortages, and diminishing
production.
In a socialist economy, central planning is useless T or F?
T
Which of the following is an advantage of a centrally planned
economy?
the system can work quickly to accomplish specific goals
Gross domestic product
GDP includes any work or production that happens in your country. It does not matter who produces it. the important thing is where it is produced
Free enterprise
An economic system that permits the conduct of business with
minimal government intervention i
The United States economy is a mixed economy because it is
based on the principles of the free market, but allows some government
intervention.
Government intervention in a modern economy is useful because
governments are able to provide some goods and services that the
marketplace has no incentive to produce.
Seven key characteristics make up the basic
principles of free enterprise.
- Profit Motive
- Open opportunity
- Legal equality
- Private property rights
- Free contract
- Voluntary exchange
- Competition
Governments role for protecting citizens
Public disclosure laws, public interest
what is a patent
A patent gives the
inventor of a new
product the exclusive
right to produce and
sell it for 20 years.
what is a trademark
a symbol or words representing a company or product
What is a copyright
exclusive legal right to publish record and film anything the right is given to originator
The basic principles of free enterprise do include
(a) competition.
(b) legal equality.
(c) profit motive.
Americans generally favor
limited government intervention in the economy.
Macroeconomics
the study of the behavior and
decision making of entire economies.
Microeconomics
- the study of the economic
behavior and decision making of small units,
such as individuals, families, and businesses
Business cycle
is a period of a macroeconomic
expansion followed by a period of contraction.
How to measure a nations macro-economy
GDP gross domestic product
GDP is
the total value of all final goods and services produced in a particular economy
Promoting economic growth policymakers pursue three main outcomes as they seek
to stabilize the economy.
Low Unemployment
(measured by the unemployment rate)
Steady Growth
measured by increase/decrease in GDP)
Stable Prices
(measured by general price levels - CPI)
Public good
a shared good or service for which it
would be impractical to make consumers pay
individually and to exclude nonpayers.
Public goods are funded by the
public sector
Free rider
is someone who would not choose to
pay for a certain good or service, but who would get
the benefits of it anyway if it is provided as a public
good
Market Failure
a
situation in which the
market, on its own, does
not distribute resources
efficiently.
an externality
an economic side effect of a good or
service that effects other people, something that happens
