Unit 1

Question 1

scarcity

Answer 1

• the condition in which our wants as a society are greater than our limited resources
• economists define almost all productive resources as scarce- with rare exceptions like “established knowledge”

Question 2

economic resources(aka factors of production)

Answer 2

land, labour, capital, entrepreneurship

Question 3

what are the types of income?

Answer 3

• rent
• wages
• interest
• profit

Question 4

what are the three fundamental economic questions?

Answer 4

• what goods and services will be produced?
• how will they be produced?
• who will get the goods and services?

Question 5

what are the three types of economies?

Answer 5

command, mixed, market

Question 6

command economy

Answer 6

• gov’ is responsible for answering all 3 economic questions
• individuals have very little economic freedom
• ex: North Korea

Question 7

mixed economy

Answer 7

• economic decisions are made by both the gov’ and individuals
• most economies in the world are mixed
• ex: Canada, New Zealand

Question 8

market economy

Answer 8

• all economic decisions are made by the individuals in the society
• all the economic freedom
• very competitive
• private ownership of resources
• consumer demand is the driving force behind what is produced

Question 9

what are the 4 types of opportunity costs(PPC)?

Answer 9

constant, decreasing, increasing, zero

Question 10

efficient economy

Answer 10

• when is there are no lost opportunities meaning that there is no way to make anyone better off without making at least one person worse off
• includes both productive efficiency and allocative efficiency

Question 11

opportunity cost

Answer 11

the value of the next best alternative that you must give up in order to get the item

Question 12

land(economic resource)

Answer 12

all of the resources found in nature. Payment for the use of the land is called rent
Ex: water, air

Question 13

labour(economic resource)

Answer 13

includes all types of human effort. Payment for the use of labour is called wages
Ex: flight attendant, post office worker, factory workers

Question 14

capital(economic resource)

Answer 14

all of the machinery, tools, and equipment used by humans in the production process. Payment for the use of capital is called interest.
Ex: bulldozer, dump truck, fishing rods, oil rigs, calculator, pen, video camera

Question 15

entrepreneurship(economic resource)

Answer 15

innovation and ideas. Payment for entrepreneurship is called profit.
Ex: dad

Question 16

microeconomics

Answer 16

the study of small economic units such as individuals, firms, and industries (competitive markets, labour markets, personal decision making, etc)

Question 17

macroeconomics

Answer 17

the study of the large economy as a whole or in its basic subdivisions (national economic growth, government spending, inflation, unemployment, etc)

Question 18

positive economic statement

Answer 18

• a statement about WHAT IS

ex: the government is spending 100000 a year on exporting goods

Question 19

normative economic statement

Answer 19

• a statement about WHAT SHOULD BE

ex: the government should spend 1000000 a year on exporting goods

Question 20

economics

Answer 20

the study of scarcity and choices

Question 21

efficiency: productive

Answer 21

• products are being produced in the least costly way

- ANY point on the production possibilities curve

Question 22

efficiency: allocative

Answer 22

• products being produced are the ones most desired by society
• the OPTIMAL point on the production possibilities curve depends on the desires of society

Question 23

zero production possibilities curve characteristics

Answer 23

• the opportunity cost of producing another unit is constant
• resources are completely adaptable to alternative uses

Question 24

absolute advantage

Answer 24

the producer who can produce the most output OR requires the least amount of inputs(resources)
*to find out who has the absolute advantage, look at the endpoints, whoever makes the most has the absolute advantage”

Question 25

comparative advantage

Answer 25

the producer with the lowest opportunity cost
to find out who has the comparative advantage, find the opportunity costs, whoever has the lower opportunity cost when producing the goods has a comparative advantage

Question 26

consumer goods

Answer 26

created for direct consumption

ex: pizza

Question 27

capital goods

Answer 27

created for indirect consumption

ex: ovens, blenders, knives

Question 28

constant opportunity cost

Answer 28

• straight line
• resources are easily adaptable for producing either good
• not common

Question 29

increasing opportunity cost

Answer 29

• curved out

- as you produce more of any good, the opportunity cost of the other good will increase