Econ chapter 1

What are trade-offs?

Alternate choices people face in making an economic decision.

In what ways can government, businesses, and individuals invest in human capital?

By investing in a persons skills and health.

a way of thinking about a problem that compares the costs of an action to the benefits received.

Cost-benefit analysis

allows consumers to consider various alternatives and decide which one comes closest to meeting their needs.

Decision making grid

An economy in which consumers and private businesses—instead of the government—make most economic decisions.

Free enterprise economy

Camille has a piano lesson during the first hour of practice for the class play. If Camille goes to the lesson, is her opportunity cost measured in money, time, or resources? Explain.

Her opportunity cost would be measured in time because she is giving up an hour of her practice time to practice playing the piano.

What does the production possibilities frontier illustrate?

It illustrates the concept of opportunity cost. The line on the graph represents the full potential when the economy uses all of its productive resources.

Is a toy factory a factor market or product market?

It is a factor market because people earn their income doing labor at these factories.

How has division of labor and specialization made Americans more economically dependent on one another and less able to do everything for themselves?

It makes us more dependent on others because division of labor and specialization does not allow any person to perform any Job. Therefore, people have to rely on others to perform the jobs they will not be doing themselves.

What are the factors of production?

Land, Capital, Labor, and Entrepreneurs.

What is the key feature of circular flow?

Markets which are locations/mechanisms for buyers & sellers to trade.

What is the basic economic problem facing all societies?

Scarcity- the condition where unlimited human wants face limited human resources.

What is opportunity cost?

The cost of the next best alternative choice among a persons choices. It is the money, time, or resources a person gives up/sacrifices.

Why, in most places, are diamonds more valuable than water?

This is because the paradox of value. People are more interested in the utility (satisfaction) of diamonds and increasing their wealth.

What are the three basic economic questions?

What must we produce? How should we produce it? For whom should we produce?

What is a product market?

Where people use their income to buy from producers.

Do durable goods include both consumer and capital goods?

Yes because both goods can last longer than 3 years.

Could other resources besides labor be unused?

Yes, time can also be unused if workers do not efficiently work during the Time ether are given or do not show up to work. Machinery could also be unused.

What is a factor market?

a market where productive resources are bought and sold. Income is also made here.

What is the paradox of value?

a situation in which some things that people really do not need, such as diamonds, are worth more than some things that people cannot live without, such as water.

What is required for something to have value?

scarcity and utility