Economics - Unit 1: What Is Money

Scarcity and Its Effects (Wants vs. Needs 2)

A good is anything that provides utility or satisfaction. Ex: Car; A good can be either tangible (A car) or intangible (Friendship); A bad is anything that provides disutility or dissatisfaction. Ex: Pollution

Three Functions of Money (2 Store of Value)

Ability of an items to hold its value over time.; Houses and artwork hold their value as well as, or better than, money.

Other key Concepts (2)

Association and Causation: Just because two events are linked (associated) does not mean that one caused the other.

Three Functions of Money (3 Characteristics of Money)

At the minimum, money must have value for both parties involved in a transaction.; It helps if money has value throughout a region, nation, or the world.

Three Functions of Money (4 Barter Economy vs. Money economy)

Barter economies rely on trading money for goods.; Money economies rely on trading money for goods.; It is easier for people to obtain goods in a money economy.

Scarcity and Its effects (Wants vs. Needs 4)

Because there is scarcity we must have a rationing device to decide who gets what quantities of the available goods.; If there were enough goods to satisfy all wants, people would not need to compete for resources.

Resources (3)

Capital: Goods that can be used in the production of other goods. (Machinery and buildings)

Other Key Concepts (1)

Ceteris Paribus is a Latin term meaning "all other things held constant" Ex: If I began to exercise regularly and lost weight, then we can say I lost weight because I began exercising, ceteris paribus.

Three Functions of Money (1 Unit of Account)

Common measure in which relative values are expressed.; In our US economy, everything is expressed in dollar values.

Three Functions of Money (3 Characteristics of Money 2)

Dollars as we use them today have a poor store of value due to inflation.; Don't think simply in terms of dollars when thinking of money.

Resources (4)

Entrepreneurship: Ability or initiative to create businesses or improve efficiency. (Bill Gates, Steve Jobs, Sam Walton, Henry Ford)

What Is Money? (2)

It also helps to avoid a true barter system (Flint, was used before other things to make fire)

Resources (2)

Labor: Physical and mental ability that a person uses to produce goods.

Resources (1)

Land: Raw natural resources (Wood, ore, coal, etc.)

Decisions Made at the Margin (2)

Marginal benefits are the additional benefits connected to the consumption of one more additional unit of a good.

Decisions Made at the Margin (3)

Marginal costs are the additional costs connected to the consumption of one or more additional unit of a good.

Three functions of Money (2 Store of Value 2)

Money can lose value during inflationary periods, but it can also gain during periods of deflation. (A little inflation is good for businesses and other things.)

What Is Money? (1)

Money is any good widely accepted for exchange in repayment of a debt.

Scarcity and Its Effects (Wants vs. Needs 1)

Needs are necessary in order to survive such as food, shelter, clothing, and health care.; Wants are all the things we desire that we do not need.

Scarcity and Its Effects (Wants vs. Needs 3)

Scarcity is the condition in which our wants are greater than the ability to satisfy them.; We must choose which wants will be satisfied and which ones will not.

Costs and Benefits

Should the internet be regulated?; In order to answer this question like an economist, we must look at both the cost and benefits of making such a move.; The benefit may be safer internet use, but what might the cost be to users?

Other Key Concepts (3)

The Fallacy of Composition: The erroneous view that what is good or true for the individual is not necessarily good or true for the group.

Decisions Made at the Margin (1)

When we make decisions based on the additional benefits or costs instead of total benefit or cost.

Opportunity Cost

When you make a choice, opportunity cost is the next best thing you could have chosen.; Every choice you make incurs an opportunity cost.; Economists believe that that the higher the opportunity cost of doing something, the less likely it will be done.