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Economics > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

Need

A

Goods that are necessities for survival

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2
Q

Want

A

Goods that make life more comfortable or enjoyable

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3
Q

Scarcity

A

The result of limited sources and people’s unlimited needs; the main problem in economics

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4
Q

Trade-offs / Alternatives

A

Alternatives (choices) that must be given up when one is chosen rather than another

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5
Q

Opportunity Costs

A

Cost of the next best alternative use of money/time/resources when one choice is made rather than another; value of the thing you give up when you make a choice

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6
Q

Goods

A

Items (particularly products and services) satisfying people’s needs and wants

(i.e.: anything built/manufactured
(computers, houses, etc.))

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7
Q

Services

A

Work/labor performed by someone

(i.e.: haircuts, entertainment, teaching, etc.)

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8
Q

Factors of Production: 1) Capital Resources

A

Human-made stuff used to make something else

(i.e.: tools, equipment, machines)

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9
Q

Factors of Production: 2) Natural Resources/Land

A

Natural stuff used in making a good/service

(i.e.: Land, water, oil, etc.)

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10
Q

Factors of Production: 3) Human Resources (Labor)

A

Labor and skills used to make/sell a product

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11
Q

Factors of Production: 4) Entrepreneurs

A

Someone who does something new, unique, and/or creative with resources

(i.e.: Walt Disney, Bill Gates, etc.)

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12
Q

Market

A

1) Meeting place (physical and online) for buyers and sellers
2) Where voluntary exchanges take place
3) The sum of all the individual’s choices/purchases

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13
Q

Factor Market

A

Market for resources
- Where most people work and earn wages
- Where businesses get resources for their products

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14
Q

Product Market

A

Where goods and services are bought and sold
- Consumers spend money that they earn from their jobs in the factor market

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15
Q

What do choice and scarcity have to do with economics?

A
  • Have to make choices with limited money, time, and resources
  • Not all things we want and need in life are unlimited; we only have limited time, money, water, food, etc.
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16
Q

Cost Benefit Analysis

A

A process of measuring the costs and benefits of a project to weight them against other projects to make a decision

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17
Q

CBA Steps

A

1) Determine Costs
2) Calculate Benefits
3) Compare Alternatives
4) Report and Plan Action

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18
Q

Benefit-Cost Ratio Formula

A

(Predicted Value of Expected Benefits / Predicted Value of Expected Costs)

(i.e.: Project 1 -> 80k Cost / 120k Benefit = 1:5 ratio)

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19
Q

What is the discount/interest rate often used for today?

A

To normally borrow money and adjust future money into present-day value

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20
Q

Annual Interest Formula

A

A = P x (1 + r)^t

A = Final Amount
P = Initial Amount
R = Interest/Discount Rate
T = Time

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21
Q

Annual Interest Formula Practice:
How much will $100 be worth a year from now at a 5% discount rate?

A

A = 100 x (1+0.05)^1
A = 105 dollars

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22
Q

Annual Interest Formula Practice:
How much is $100 a year from now worth today at a 5% discount rate?

A

100 = P x (1 + 0.05)^1
P = 95.24 dollars

23
Q

Economic Systems: 1) Traditional

A

A system that relies on customs, history, and time-honored beliefs.
- Tradition impacts production and distribution
- Dependent on agriculture, fishing, hunting, gathering, etc.
- Bartering > money

24
Q

Economic Systems: 2) Command

A

A system where production is publicly owned
- A central authority controls economic activity, assigning quantitative production goals and issuing raw materials to productive enterprises (businesses, firms, etc.)

25
Q

Economic Systems: 3) Market

A

A system where supply and demand control the production of goods and services
- Economies are based on voluntary exchange and are NOT controlled by a central authority (i.e.: a govt.)

26
Q

Economic Systems: 4) Mixed

A

A system combining aspects of capitalism and socialism
- Private property + economic freedom with capital
- Govt. interference involved

27
Q

Adam Smith

A

Considered the “Father of Capitalism”
- The Wealth of Nations: “The wealth of nations carry the message of laissez-faire”

28
Q

What is considered “The Tragedy of the Commons?”

A

Public property is often overused and abused compared to private property

29
Q

Laissez-faire

A

When a central authority, such as the government, does not interfere with economic activity

30
Q

Demand

A

The willingness and ability to buy a product or service at a certain price

31
Q

Law of Demand

A

When prices go up, quantity demanded goes down, and vice versa

32
Q

Why is the law of demand usually true?

A

Increased opportunity costs:
- The more you pay for a product, the more alternatives you give up to buy the product
- (i.e.: A candy bar at $1 has a lower opportunity cost than the same bar at $4)

33
Q

Utility

A

Basically satisfaction/happiness

34
Q

Total Utility

A

The TOTAL satisfaction obtained from the entire consumption of a product

35
Q

Marginal Utility

A

The satisfaction we get from consuming the LAST unit of a product

36
Q

Law of Diminishing Marginal Utility

A

At some point, the utility we get from consuming an additional unit will start to DECREASE

37
Q

What slope does a demand curve usually have?

A

A negative slope

38
Q

Rules for Change in the Quantity Demanded

A

1) A change in price = change in quantity (number) demanded

2) A change in quantity demanded = movement along the demand curve (usual movement)

39
Q

What does it mean when there’s a shift in the demand curve?

A

People want to buy DIFFERENT amounts of a product at the SAME prices

40
Q

6 Factors Shifting the Demand Curve: Substitutes (Price of) - S

A

Goods that can be used in place of another
- Use of one DECREASES the use of the other
- Substitution

41
Q

6 Factors Shifting the Demand Curve: Tastes and Preferences - T

A

Ads, news reports, fashion trends, new products, seasons, influencers, etc.

42
Q

6 Factors Shifting the Demand Curve: Income - I

A

Income increases = demand increases (more opportunities to afford and buy goods and services)

Income decreases = demand decreases

43
Q

6 Factors Shifting the Demand Curve: Price of Compliments - P

A

Complements = related goods
- Use of one INCREASES the use of the other

44
Q

6 Factors Shifting the Demand Curve: Expectations - E

A

Buyers’ beliefs about the future of a good
(i.e.: Weather forecasters announce rain snow, consumers stock up on umbrellas)

45
Q

6 Factors Shifting the Demand Curve: Number of Consumers - N

A

More people in the market (total) = demand increases

Less people = demand decreases

46
Q

Supply

A

The quantity of a product that a supplier is willing to sell at a certain price

(i.e.: Pepsi may be willing to sell only 1,000 sodas at $0.50 but is willing to sell 4,000 at $1.00)

47
Q

Law of Supply

A

When prices increase, the quantity supplied increases, and vice versa

48
Q

What does the supply curve show?

A

It shows the relationship between price and quantity supplied

49
Q

6 Factors Shifting the Supply Curve: Subsidies and Taxes - S

A

Payments from the govt. to individuals, groups, businesses, etc.
- people also have to pay taxes

50
Q

6 Factors Shifting the Supply Curve: Technology - T

A

New technology usually increases supply by lowering the cost and time of production

51
Q

6 Factors Shifting the Supply Curve: Regulations (Govt.) - R

A

Laws/rules that either restrict/protect businesses (i.e.: pollution laws, safety standards, etc.)

52
Q

6 Factors Shifting the Supply Curve: Input (Resources) Costs - I

A

Change in how much it costs to produce an item
(i.e.: wages increasing or decreasing, supplies and materials increasing or decreasing in expenses)

53
Q

6 Factors Shifting the Supply Curve: Productivity - P

A

When resources for production become more efficient
(i.e.: managers motivating/de-motivating employees, the number of employees working, etc.)

54
Q

6 Factors Shifting the Supply Curve: Sellers (Number of)

A

Firms or suppliers either enter or leave the market
(i.e.: New companies are founded, companies go bankrupt or out of business, etc.)

Economics (3 decks)

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