Unit One Flashcards
Economics
Economics is the study of how people satisfy wants with their scarce resources.
Microeconomics
The study of the choices made by economics such as households, companies, and individuals.
Macroeconomics
Examines the behavior of entire economies.
Goods
Physical objects that someone produces: ie. food, clothing, etc.
Services
Are actions or activities that one person performs for another: ie. medical care, plumber, etc.
Scarcity
The condition where unlimited human wants face limited resources.
Shortage
Occurs when consumers want more of a good or service that producers can or are willing to make available at a particular price.
Entrepreneurs
Are the people who decide how to combine resources to create new goods and services. (Starting a business small or big)
Factors of Production
Resources necessary to produce what people want or need.
Physical Capital
Human made objects used to create other goods and services
Human Capital
The knowledge and skills a worker gains through education and experience
Analysis
Looks at the “why” and “how” of economic activity–why prices go up or down, for example, or how taxes affect savings.
Explanation
Refers to how economists communicate knowledge of the economy and its activities to the society’s population.
Prediction
Refers to how yesterday’s and today’s economic activities advise us of potential future activity.
Durable Goods
Goods that last for at least 3 years when used regularly.
Non-Durable Goods
Item that lasts for fewer than 3 years when used regularly.
Capital Goods
A tool or good such as machinery or equipment that is used by businesses to produce other products.
Consumer Goods
A good intendent for fine use.
Consumers
The people who purchase things; they use goods and services to satisfy wants and needs.
Producers
The people (businesses) who make things that satisfy consumers’ needs and wants.
Value
Worth expressed in dollars and cents. Scarcity by itself is not enough to create value. For something to have value, it must also have utility.
Utility
A good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person.
Wealth
The accumulation of goods that are tangible, scarce, useful, and transferable to another person.
Trade-Offs
The alternative choices people face in making an economic decision. A decision-making grid lists the advantages and disadvantages of each choice.
Opportunity Cost
The cost of the next best alternative among a person’s choices. The opportunity cost is the money, lime, or resources a person gives up, or sacrifices, to make his final choice.
Guns or Butter
A common phrase to describe the choices facing governments: the choice between spending money on military or domestic needs.
Thinking at the Margin
Adding or subtracting one unit, such as one hour or one dollar, deciding how much more or less to do.
Cost-Benefit Analysis
Comparing the opportunity cost and the benefits or what you will sacrifice and what you will gain.
Marginal Cost
The extra cost of adding one unit, ie. sleeping one extra hour or building one extra house.
Marginal Benefit
The extra benefit of adding the same unit as long as the marginal benefits exceed the marginal costs, or it pays to have one more unit.
Production Possibilities Curve
A graph that shows alternative ways to use an economy’s productive resources.
The production possibilities frontier diagram illustrates the concept of opportunity cost.
Absolute Advantage
When a person or nation can produce more of a given product than another person or nation using a given amount of resources.
Law of Comparative Advantage (LOCA)
A nation is better off when it produces goods and services for which it had a comparative advantage, each nation can then use the money it earns selling goods and services it makes efficiently and buy goods and services it doesn’t.
