The Economic Way of Thinking Flashcards
Consumers have 2 basic needs:
Wants
Needs
___ are desires that can be satisfied by consuming a good or service
Wants
___ are things such as food, clothing, and shelter, that are necessary for survival
Needs
___ is the situation that exists when there are not enough resources to meet human wants
Scarcity
___ is the study of how people choose to use scarce resources to satisfy their wants
Economics
___ is central to the use of scarce resources
Choice
___ are physical objects that can be purchased, such as food, clothing and furniture
Goods
___ is work that one person performs for another for payment
Services
___ is a person who buys goods or services for personal use
Consumer
___ is a person who makes goods or provides services
Producer
Scarcity requires 3 basic questions:
WHAT will be produced?
HOW will it be produced?
FOR WHOM will it be produced?
___ are those resources needed to produce goods and services
Factors of Production
Factors of production is divided into 4 categories:
Land
Labor
Capital
Entrepreneutship
The 4 factors have what in common?
Limited Supply
___ includes all the natural resources found on or under the ground that are used to produce goods and services
Land
___ is all the human time, effort, and talent that goes into the making of products
Labor
___ is all the producer’s physical resources
Capital
Capital can also be known as ___ or ___
Physical Capital
Real Capital
Businesses invest in ___
Real Capital
Worker invest in ___
Human Capital
___ is the combination of vision, skill, ingenuity, and willingness to take risks that are needed to create and run a new business
Entrepreneurship
2 Factors that shape economic choices:
Incentives
Utilities
___ is the benefit or satisfaction received from using a good or service
Utility
to ___ means to make decisions according to the best combination of costs and benefits
Economize
___ is the alterternative you give up when you make an economic choice
Trade-Off
___ of a decision is the value of the next best alternative, or what you give up by choosing one alternative over another
Opportunity costs
___ is the practice of examining the costs and benefits of a choe as an aid to decision making
Cost-Benefit Analysis
___ shows what you would get and what you would give up when you make choices
The Decision Making Grid
___ is the additional cost of using one or more unit of a product
Marginal Cost
___ is the additional satisfaction from using one or more unit of a product
Marginal Benefit
In Economics, when we think of ___ we are thinking on a per unit basis
Margin
The ___ is a graph used by economists to show the impact of scarcity on an economy
PPF
What does PPF stand for?
Production Possibilities Frontier
The PPF is based on 4 assumptions that simplify economic interactions:
Resources are fixed
All resources are fully employed
Only 2 things can be produced
Technology is fixed
___ is a latin phrase used in economics to mean all other things being held equal or constant.
Ceteris Paribusis
The PPF represents the border between ___ and ___
Possible
Not Possible
___ is the condition in which economic resources are not being used to produce the maximum amount of goods and services
Efficiency
___ is the condition in which economic resources are not being used to their full potential
Underutilization
___ states that as production switches from one product to another, increased amounts of resources are needed to increase the production of the second part
The Law of Increasing Opportunity Costs
___ means you can’t get anymore of something
Fixed
Anything that causes economic output to increase or decrease will cause the curve to ___
Shift
Examples of outward shifts
Economic Growth
Technology
Examples of inward shifts
Natural Disasters
War/Plague
Technology replaces
Entrepreneurship
