Economics Chapter 1
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