Econ Ch.1 Benchmark Notes

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What were Adam Smiths 4 main pieces of economic framework?

-Division of labor -Specialization -Human capital -Nation's wealth = sum of goods produced

What is a capitol good?

Good used to create other goods/services

What are economic products?

Goods and services that are useful, relatively scarce, and transferable to others

How did Smith believe that Capitalism causes people to do better work?

He believes that if people have to rely on their work for survival they will unconsciously work harder (Self interest will cause people to work harder

How do you increase your productivity possibility frontier?

Increase resources, increase productivity, technology

What is a consumer good?

Intended for final use by an individual

Scarcity causes prices to _________

Rise

What is the fundamental economic problem?

Scarcity

What do businesses do in the product market?

Sell goods and services

What do individuals do in the factor market?

Sell land, labor, capitol, or/and entrepreneurship

What is Division of labor?

Separate job into tasks

What is economics?

The study of how people try to satisfy seemingly unlimited wants through the careful use of relatively scarce resources.

What is a durable good?

good that lasts 3 years or more when used regularly

Definition of ECONOMIC GROWTH

increase in a nation's total output of goods and services over time

What is utility?

the capacity to be useful and provide satisfaction

Definition of CAPITAL

tools, equipment, and factories used in the production of goods and services; one of the four factors of production

Service

work that is preformed for someone

What is Specialization?

Get better at performance of 1 thing

What is a nondurable good?

A good that lasts less than 3 years when used regularly

Who is the father of economics?

Adam Smith

What is wealth?

All assets except services

What is productivity?

Amount of output with given amount of resources

What do individuals do in the product market?

Buy goods and services

What was the Wealth of Nations book the blueprints for?

Capitalism

Types of Goods

Capitol, Consumer, Durable, Non-Durable

What are the four parts of the study of economics?

Description, Analysis, Examination, Prediction

What are the 2 things that the government should do in the invisible hand theory?

Enforce agreements and provide public goods

In all societies, the government decides what to produce (True or False)

False

What is scarcity?

Limited resources for unlimited wants.

What are the 5 key components of economic growth?

Productivity Human Capitol Division of Labor Specialization Economic Interdependence

What do businesses do in the factor market?

Purchase the land, labor, capitol, and entrepreneurship

What is a standard of living?

Quality of life based on ownership of necessities and luxuries that make life easier

What is Economic interdependence?

Rely on one another for economic products.

What is Human Capitol?

Sum of people with skills and abilities

What are the 7 consumer rights?

To be informed, to choose, to safety, to be heard, to have problems corrected, to consumer education, to services

What is value?

To have monetary value, a good must be scare and have utility for the person purchasing it

All societies are faced with the problem of scarcity (True or False)

True

Goods

Useful tangible item that satisfies a want

What is the name of Adam Smith's most famous book?

Wealth of Nations

What are the three basic economic questions?

What to produce? How to produce? For whom to produce?

What is a Free Enterprise Economy?

When private businesses seeks a profit with limited government intervention and the businesses make the What, how, and for whom decisions

What is a lost liter?

When the business earns no profit margin on an item, but they make up for it because people will also buy items with a large profit margin.

Definition of CONSUMERISM

a social movement that was aimed at promoting the interests of consumers

Definition of TRADE-OFFS

alternative that must be given up when one choice is made rather than another

What is the paradox of value?

apparent contradiction between the high value of a nonessential item and the low value of an essential item (diamonds/water)

Definition of OPPORTUNITY COST

cost of the next best alternative use of money, time, or resources, when one choice is made rather than another

Definition of PRODUCTION POSSIBILITIES CURVE

diagram representing all possible combinations of goods and/or services an economy can produce when all productive resources are fully employed

What does the "invisible hand" mean?

it means the self-interested individuals will produce what is valued by society the most without the direction of a central authority. aka govt should stay out, people do what they want

Definition of PRODUCTIVITY

measure of the amount of output produced in a specific time period with a given amount of output produced in a specific time period with a given amount of resources; normally refers to labor, but can apply to all factors of productions

Definition of MARKET

meeting place or arrangement through which buyers and sellers interact to determine price and quantity of an economic product; may be local, regional, national, or global

Definition of LAND

natural resources or "gifts of nature" not created by human effort; one of the four factors of production

Definition of LABOR

people with all their abilities and efforts; one of the four factors of production; does not include the entrepreneur

Definition of FACTORS OF PRODUCTION

productive resources needed to produce goods; the four factors are land, capital, labor, and entrepreneurship

Definition of ENTREPRENEURS

risk-taking individuals who introduce new products or services in search of profits; one of the four factors of production


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