Economics Chapter 1

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product markets

markets where producers sell their goods and services

labor

people with all their efforts, abilities and skills

entrepreneur

risk taker in search of profits who does something new with existing resources

service

work that is performed for someone

value

worth of a good or service as determined by the market

List the three basic economic questions every society must answer

What, how, and for whom to produce

market

a location or other mechanism that allows buyers and sellers to exchange a specific product

division of labor

a way of organizing work so that each individual worker competes a separate part of the work

Scarcity

condition that results from society not having enough resources to produce all the things people would like to have

opportunity cost

cost of the next-best alternative

What are the four elements of economics

description, analysis, explanation and prediction

production possibilities frontier

diagram representing various combinations of goods and services an economy can produce when all its resources are in use

capitalism

economic system in which private citizens own and use the factors of production in order to generate profits

trade offs

alternative choices

free enterprise economy

one in which consumers and privately owned businesses, rather than the government, make majority of the what, how and for whom decisions

want

something you would like to have, but is not necessary for survival

specialization

takes place when factors of production perform only tasks they can do better or more efficiently than others

wealth

the accumulation of products that are tangible, scarce, useful and transferrable from one person to another

utility

the capacity to be useful and provide satisfaction

standard of living

the quality of life based on the ownership of the necessities and luxuries that make life easier

economics

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

capital

the tools, equipment, machinery and factories used in the production of goods and services

factor markets

where the factors of production are bought and sold

Describe the factors of production

Land, capitol, labor and entrepreneurs. Land-resources not created by people. Capital- equipment, machinery, tools and factories used to produce. Labor- people and all of their skills work and abilities. Entrepreneurs- singled out from people in labor because they take risks and use resources in new ways to make a profit

What is the circular flow of economic activity

Money consumers spend goes to product markets which flows into business income, this income turns into business payments for resources which are paid to the factor markets, factor markets get this money back to the individual by means of income from resources.

Describe the fundamental economic problem

The fundamental economic problem is that societies do not have enough productive resources to produce everything people want, aka scarcity.

Why is the study of economics important?

The study of economics is important because it helps people become better citizens by helping us become better at making decisions.

Discuss relationship among scarcity, value, utility and wealth

The value of a good or service depends on its scarcity and utility. The good must have utility and value to have monetary value. Wealth is the accumulation of these tangible and useful goods.

Describe the relationship between trade-offs and opportunity costs

Trade offs are alternative choices we can make. Opportunity costs are choices that are the next best alternative to the good/service that is chosen

need

basic requirement for survival, food, shelter, clothing


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