Chapter 1 Economics Reading Enrichment

Sunk Cost

A cost you have already incurred and cannot recover, regardless of what you do now.

Provide examples of goods and services.

A good would be like corn because it is a tangible thing that can actually stimulate the economy. While a service is like a musical; you cannot touch a musical or do anything with the actual performance itself.

Entrepreneur

A person who organizes, manages, and takes on the risks of a business.

Service

Activities that are consumed at the same time they are produced.

What is the economic problem and why does it make choice necessary?

An economy that doesn't change much over time.

Why are all economists always talking about money and wealth?

Because the world revolves around one thing...money; and money never rests.

Capital Goods

Buildings, machines, technology, and tools needed to produce goods and services.

How would choosing to volunteer your time tutoring young students fit in with the concept of rational self-interest?

By tutoring young students, you are helping the students achieve a goal without having to commit full time involvement in their lives.

Describe the role of marginal analysis in making economic choices

Economic choice is based on a comparison of the expected marginal benefit and the expected marginal cost of the action under consideration.

Labor

Human effort directed toward producing goods and services.

Name the three categories of productive resources and provide examples of each.

Human resources: the skills that people have and the labor they perform. It includes physical AND mental talents. Construction workers AND Lawyers are examples of human resources. Capital Goods: things that make work easier. Examples of capital resource are machines, factories, tools, and buildings. Whenever a company buys one of these things, they are INVESTING in their business. Entrepreneurship: the capacity or ability tor organizing the other three resources. People who START business are called entrepreneurs. When they start businesses they also create jobs for other people.

Why isn't the opportunity cost of using your time to do homework always the same?

I don't have the same amount of homework every single night so the amount varies.

Why is there an opportunity cost for every choice you make?

If it is a choice, then you are deciding between two or more options. The opportunity cost of whatever you decide means you have chosen the best option, with the next best option foregone.

Goods

Items purchased to satisfy needs and wants.

What are examples of productive resources you use in your life?

Life experiences, wit, learned capabilities, knowledge.

How do market participants interact?

Market participant's interaction determines how an economies resources get allocated.

Natural Resources

Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.

What is opportunity cost and why does it vary with circumstances?

Opportunity cost is the highest-valued alternative that must be given up to engage in an activity. It varies because it depends on your alternatives. Your opportunity cost is the value of the best alternative you gave up.

Human Resources

People who work to produce goods and services (both physical and mental).

Economics

Study of how societies decide what to produce, how to produce it, and how to distribute what they produce.

National Economics

Study of the economic behavior of the economy as a whole, especially the national economy

Scarcity

The condition facing all societies because there are not enough productive resources to satisfy people's unlimited wants.

What are the guidelines for choosing among alternatives?

The guidelines are calculate opportunity cost, consider your time involved, and ignore sunk cost.

Opportunity cost

The highest-valued alternative that must be given up to engage in an activity.

Productive Resources

The inputs used to produce the goods and services that people want.

Economic Theory

This is a simplification of economic reality used to make predictions about the real world.

Marginal

This means incremental, additional, extra, or one more. Refers to a change in an economic variable, a change in the status quo.

Why should you ignore costs you have already paid when making decisions?

To make sure that you don't pay for something again that you have already payed for and spend your money on the things you have not payed for.

What is the central problem you when you make economic choices?

You do not always know what the result will be in the long run.

How will you go about measuring the opportunity cost of attending college?

You must find a job that would give you enough money for tuition, to buy books, room and board and other factors that go into calculating the price of college.

What does it mean to calculate opportunity cost?

calculating opportunity cost means making a choice based on the current knowledge of the situation and assessing alternatives while trying to do the best you can for yourself

Market Economics

economy based on the power of division of labor in which the prices of goods and services are determined.

Explain the goal of economic theory

the goal of economic theory is to make predictions about the real world, such as what happens to the consumption of Pepsi when its price increases

Market

they are means by which buyers and sellers carry out exchange