Economics Chapter 2

Interdependence allows you to focus more on a couple of things rather than everything you need. Interdependence may also allow you to obtain things you couldn't get on your own. On the other hand, interdependence can also cause issues. The people you are relying on to give you what you want or need may not get it to you causing a problem. Another problem that could arise would be if the person you are trading with is unfair and you are giving more than you are receiving.

Describe the benefits and risks of interdependence

Barter

Direct trade; exchanging one set of good for another

Macroeconomics

Examines the behavior of entire economies. (ex. unemployment)

When bartering, people may have trouble coming to an agreement which makes the process longer and more difficult. These difficulties have lead society to using money because it is simpler and easier to come to an agreement about.

How do problems associated with barter contribute to the use of money as a form of exchange?

You use a human resource, natural resource, and capital resource to make food every day. You use a capital resource when you go shopping. You use human resources at school when teachers teach you.

What factors of production do you use in your daily activities? Ex. You use a human resource and a capital resource in the production of your homework.

Economics

The study of how society chooses to use scarce resources to satisfy it's unlimited wants.

Microeconomics

The study of the choices made by economic actors such as households, companies, and individual markets.

Technology

The use of technical knowledge and methods to create new products or make existing products more efficiently

Efficiency

The use of the smallest amount of resources to produce the greatest amount of output

Utility

The usefulness to a person of an item/product

Opportunity Costs

The value of the next best alternative given up to obtain that item (the cost of a trade-off)

Using credit allows you to use and enjoy things even when you can't pay for them immediately. This makes it easier to buy things when you know you can pay it off in the future rather than worrying about the whole thing in the present. However, using credit can also be a liability. If you can not pay the amount required, the merchandise might be taken away from you, Furthermore, not paying your dues could potentially hurt your credit making it harder for you to use it in the future.

What are the benefits and liabilities of credit?

Your needs, your wants and goods and services.

What are the key influences on your daily economic decisions?

A standardized item that is generally traded for goods or services A measure of value that allows both producers and consumers to determine and express worth A store of value that can be saved and used to purchase items at a later date

What are the three functions of money?

Authoritarian socialism/communism: the government owns almost every factor of production Capitalism: The government has very little control/ownership Democratic Socialism: the government owns some of the factors of production; usually only key industries

What are the three types of mixed economies? Describe the extent of government involvement in each one.

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

What three questions must all economic systems address?

Self-sufficiency

When a person can fulfill all of their needs without outside assistance

Exchange

When producers and consumers agree to provide one type of item in return for another

Although self-interest leads people to fulfill their own needs and wants it also helps the economy. Without realizing it, people allow their self-interest to lead them to the decision best for society and themselves. Incentives are important to the economy because they encourage people to sell and/or buy more products improving the economy.

Why are self-interest and incentives important in this economic system?

People need to make choices about distributing resources so the greatest number of needs and wants are satisfied. Furthermore, by making these choices, people waste fewer resources.

Why do people need to make choices about distributing resources?

Productivity is important to society because it creates an opportunity for more resources to be made/used and more wants/needs to be satisfied with less work and money used.

Why is productivity important to society?

A person might become an entrepreneur to make a lot of money by creating their own product. A successful entrepreneur should be organized, intelligent, creative, and not afraid to take risks or lose money.

Why might a person become an entrepreneur? What characteristics might someone need to be a successful entrepreneur?

Productivity

The level of output that results from a given level of input

Capital Resource

The manufactured materials used to create products

Scarcity

The most basic problem of economics. When there are not enough resources or money to satisfy everyone's wants/needs

Specialization

A focus on one activity that leads to the worker being better at that activity

Market

A free exchange of goods and services; provides the only form of control over what goods and services are bought and sold

Entrepreneur

A person who attempts to start a new business or introduce a new product--risking economic failure in return for the possibility of financial gain.

Economist

A person who studies economic choices

Service

Actions or activities that are performed for a fee (ex. Lawyers, plumbers)

Credit

Allows consumers to use items before completing payment for the merchandise

Value

Amount of money, or price that determines the worth of a good or service for the purpose of exchange

Traditional Economy

An economy based on custom and tradition; Contemporary economic activities are based on the collection of rituals, habits, laws, and religious beliefs of the group's ancestors; three questions are answered with the past

Market Economy

An economy in which individuals answer the three basic economic questions; the government has no control over what, what, and for whom goods are produced

Democratic Socialism

An economy in which the government owns some of the factors of production (usually limited to key industries like electrical utilities)

Authoritarian Socialism

An economy most closely related to a command model, also known as communism; government owns/controls almost all factors of production

Capitalism

An economy most closely related to a market model; individuals own the factors of production and answer the basic economic questions

Mixed Economy

An economy that combines elements of traditional, market, command economic models to answer three basic economic questions

Command Economy

An economy that relies on government officials to answer the three basic economic questions.

Human Resource

Any human effort exerted during production

Money

Any item that is readily accepted by people in return for goods and service

Resource

Anything that people use to make or obtain what they need or want

Division of Labor

Assigning a small number of tasks to each worker

Natural resource: milk Human resource: Manager or CEO Capital Resources: Cash register, lights

Consider the factors of production and give one example not listed in the text of each of the following: natural resources, human resources, capital resources

What to produce? -I want to produce good grades in my classes by studying the info. How to produce? -I produce the good grades by studying the material. I allocate my time and energy to each subject based on how well I think I already know the material. I give more time to the things I don't know as well and less time to things I do know well. To make sure I stay productive, I study quietly and alone so my focus is on the material, and I can learn it quicker. For whom to produce? - I am producing good grades for myself when I am studying. All the work put into the work goes towards my grades and their improvement.

How do you decide to distribute your limited time and effort in your studies? Explain how you answer the three main production questions when studying for your classes?

Allocate

How to distribute resources in order to satisfy the greatest number of needs and wants.

Clothing: bought online through a company (amazon, kohls, etc.) The person buying the clothing relies on the company to get them the clothing. The company relies on the consumer to buy clothes to keep them in business. Games/Toys: Can be purchased online at companies like amazon Consumers rely on producers to get them their game or toy. The producer relies on the consumer to buy items to keep them in business. Travel Tickets: People buy tickets to different destinations online. People rely on travel agencies to get them the tickets to the place they are traveling. The agencies rely on consumers to buy tickets to keep them in business.

Identify three goods and services that are exchanged on the internet. How do these exchanges reflect the concept of interdependence?

Natural Resource

Items provided by nature that can be used to produce goods and to provide services

Trade-off

Making a sacrifice by choosing among alternative uses for available resources

Consumer

The people who decide to buy things

Producer

The people who make the things that satisfy consumers' needs and wants

Good

Physical objects that can be purchased

Interdependence

Relying on others for additional goods and services you can not produce yourself; events or developments in one region of the world or sector of the economy influence events or developments in other regions or sectors

Factors of Production

Resources that can be used to produce goods and services

How do forms of interaction within your school demonstrate interdependence? (Example: Social Studies teachers need the English department to help students engage as good readers/writers).

Science teachers have to rely on math teachers to teach kids a good understanding of math that they will apply to equations in science class. Students rely on teachers to give them a good education, and teachers need students to teach.

production possibilities curve

Shows all of the possible combinations of two goods or services that can be produced within a stated time period

Incentive

Something that encourages you to behave in a particular way; companies use these to boost sales

Capital Good

The buildings, structures, machinery and tool used in the production process

Self-interest

The impulse that encourages people to fulfill their needs and wants

I wanted an even amount of cards

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