Module 1: Basic Economic Concepts Flashcards
What is economics?
The study of how society chooses to use its scarce resources for the production of goods and services to satisfy unlimited wants
What is opportunity cost?
The most desirable alternative given up as the result of a decision
What is the PACED model?
Define the PROBLEM List the ALTERNATIVES List the CRITERIA EVALUATE your choices Make a DECISION
Who is the father of modern economics?
Adam Smith
What are the 6 characteristics of the market economy?
Private ownership Limited government Competition Consumer Sovereignty Profit Motive Voluntary Market Exchange
What is consumer sovereignty?
Consumers determine which products and services will be made based on where they choose to spend their money
What is an incentive?
A way of encouraging or discouraging behavior.
Waht are the 3 basic economic questions?
What will be produced?
How will the goods and services be produced?
For whom will they by produced?
In a command economy, who answers the 3 basic economic questions?
The government
What are the four economic systems?
Market
Mixed
Command
Traditional
What is the theory of the invisible hand?
The market forces of supply and demand should drive the economy.
What is scarcity?
The condition of not being able to have all of the goods and services one wants
What are the four factors of production?
Labor (Human Resources)
Land (Natural Recsrouces)
Capital Resources
Entrepreneurship
What is a trade-off?
When you give something up to gain something else
What does the Production Possibilities Curve (PPC) illustrate?
The maximum amount of output that can be produced using the current resources and technology
