Unit 1

Question 1

Economics

Answer 1

The study of how individuals and societies make choices about ways to use scarce resources to fulfill their wants

Question 2

Scarcity

Answer 2

Condition of not being able to have all of the goods & services one wants because wants exceed what can be made from all available resources at any given time

Question 3

Factors of Production

Answer 3

Resources of land, labor, capital & entrepreneurship used to produce goods or services

Question 4

Land

Answer 4

Natural resources and surface land and water

Question 5

Labor

Answer 5

human effort directed toward producing goods and services

Question 6

Goods

Answer 6

tangible objects that satisfy people’s wants

Question 7

Services

Answer 7

actions that can satisfy people’s wants or needs

Question 8

Capital

Answer 8

previously manufactured goods used to make goods and services

Question 9

productivity

Answer 9

the amount of output that results from a given level of inputs

Question 10

entrepreneurship

Answer 10

ability of risk-taking individuals to develop new products and start new businesses in order to make profits

Question 11

technology

Answer 11

advance in knowledge leading to new and improved goods & services and better ways of producing them

Question 12

Wants

Answer 12

anything other than what is needed

Question 13

Needs

Answer 13

things required for basic survival

Question 14

trade-off

Answer 14

sacrificing one good or service to purchase another

Question 15

opportunity cost

Answer 15

value of the next best opportunity given up for the alternative chosen

Question 16

production possibilities curve

Answer 16

graph showing the maximum combination of goods & services that can be produced from a fixed amount of resources in a given period of time

Question 17

microeconomics

Answer 17

the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms

Question 18

macroeconomics

Answer 18

the branch of economic theory dealing with the economy as a whole and decision making such as large units or government

Question 19

economy

Answer 19

the production and distribution of goods & services in a society

Question 20

economic model

Answer 20

a theory or simplified representation that helps explain and predict economic behavior in the real world

Question 21

hypothesis

Answer 21

an assumption involving 2 or more variables that must be tested for validity

Question 22

economic system

Answer 22

way in which a nation uses its resources to satisfy its people’s needs and wants

Question 23

traditional economy

Answer 23

system in which economic decisions are based off customs and beliefs that have been handed down from generation to generation

Question 24

market economy

Answer 24

system in which individuals own the factors of production and make Econ decisions through free enterprise while looking out for their own families

Question 25

market

Answer 25

freely chosen activity between buyers and sellers of goods & services

Question 26

circular flow of economic activity

Answer 26

economic model that pictures income as flowing continuously between businesses and consumers

Question 27

mixed economy

Answer 27

system combining characteristics of more than one type of economy

Question 28

capitalism

Answer 28

economic system in which private individuals own the factors of production

Question 29

laissez-faire

Answer 29

economic system in which the government minimizes its interferences with the economy

Question 30

free enterprise system

Answer 30

economic system in which private individuals own the factors of production and decide how to use them within legal limits

Question 31

profit

Answer 31

money left after all the costs of production – wages, rents, interest, and taxes have been paid

Question 32

profit incentive

Answer 32

desire to make money that motivates people to produce and sell goods & services

Question 33

private property

Answer 33

whatever is owned by individuals instead of the government

Question 34

competition

Answer 34

rivalry among producers or sellers of similar goods & services to win more business