Unit 3 Review Sheet Flashcards
Economics
society has unlimited wants but limited resources, economics is the study of how society manages these scarce resources
Scarcity
a situation in which the amount of something actually available would not be sufficient to satisfy the desire for it if it were provided free of charge
Factors of Production
natural resources (land), labor, capital (physical or human) and entrepreneurship
Entrepreneur
a person who takes a risk in combining land, labor, and capital to create a new good
Trade-off
alternatives that we must give up when we make a choice
Opportunity Cost
the most desirable of the options you pass up
Efficiency
when you utilize resources to produce the maximum amount of goods, represented by any point on the line of a production possibilities curve
Standard of living
Level of economic prosperity for the people of an area. A nation’s economy must grow, innovate to improve its standard of living
Free Enterprise System
another name for capitalism. You are free to start a business that provides usefulness to consumers
“Guns or Butter”
the choice between producing military or consumer goods
Profit
The motive for businesses in a free enterprise system, the desire to make money
What is the purpose of a production possibilities curve?
shows alternatives to what an economy can produce
What are some ways a country can improve its standard of living?
A nation’s economy must grow to improve its standard of living. Especially if its population is growing. New jobs and income need to be provided. Innovation plays a huge role.
What are the characteristics of a free enterprise system?
capitalism, economic freedom, private property, profit motive, competition
What are the characteristics of a command economy?
the central government makes all decisions about the production and consumption of goods and services
What are the characteristics of a market economy?
economic decisions (production and consumption) are made by individuals and are based on voluntary exchange or trade. Also called free markets or capitalism.
What are the characteristics of a mixed economy?
are systems that combine tradition and the free market with limited government intervention
What are the characteristics of a traditional economy?
rely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it (consumption)
What type of economy does the United States have?
modified free enterprise system (capitalism with government intervention)
What is the Law of Increasing Cost? How does it affect production of goods?
As production increases for one item, more and more resources are necessary to increase production of the second item.
What role do competition and self interest play in a market economy?
Competition is the regulating force in the free market. Self-interest is the motivating force in the free market.
Explain a Socialist’s view of the economy
A social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout society.
What are the three main categories of resources?
Land, labor, and capital
How is resource allocation determined in a market system?
We allocate our money or set it aside to fulfill wants that we feel are most important. Prioritization of resources.
