UNIT 1: ECON TEST

What is a consumer good?

A consumer good is intended for final use by individuals.

Explain the difference between a good and a service.

A good is tangible and a service is not tangible. A good could be scissors, a tangible object. A service is work performed for someone, such as a haircut.

How do businesses depend on individuals and families in households?

Businesses depend on individuals and families to provide labor for their business as well as money to keep their business running - the households provide the revenue.

What is Economics?

Economics is the study of how individuals, families, businesses, and societies use limited resources to fulfill unlimited wants.

Explain the term economic products, what does this mean?

Economics products are goods and services that are produced for an economic system.

What is a capital good?

Goods used to produce other goods.

How do individuals and families in households depend on people in business?

Households (individuals and families) depend on businesses to provide them with products that they wanted/needed. They also depend on the businesses that they work for their wages/income.

The term wealth in an economic sense is defined as what?

In an economic sense, wealth is the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another.

Economics deals with the description of economic behavior, what are three terms that we use to describe the economy?

Inflation, GDP, Stock Market

What does the Production-Possibilities Curve show? Explain.

It shows the maximum combinations of the two goods that can be produced.

Why is it important for economists to make predictions about what might happen in the future?

It's important to make economic predictions because these predictions can help make wiser decisions in the future. You would need to consider what would happen in the future before you make some economic decisions, as some could prove very bad, so it's important to make predictions.

What are the four factors of production? Provide and example of each.

LAND - natural resources (i.e. water) LABOR - Factory Workers (or farmers) CAPITAL - Delivery Trucks ENTREPRENEURSHIP - Herman W. Lay (founded Lays)

Think about the essay questions...

Look at them.

Why is money not a factor of production?

Money is not a factor of production because it is not directly involved in the production of goods and services. It more facilitates the process of production - if you think about it, who puts the money to work in factors of production?

List 3 Needs and 3 Wants

Needs: - Food - Water - Shelter Wants: - A cool new pair of shoes - A nice house in nature in the future - 2 dogs

What positive or negative consequences might result from the opportunity cost of choices? Explain.

One example of a positive consequence from an opportunity cost could be getting an A on your test. For example, if you decide to stay home and study instead of go out with to dinner with your friends, you will do much better on your test. However, a negative consequence of this choice could be that you miss out on some quality time with your friends and a nice meal at a fancy restaurant or something.

What does the term opportunity cost mean?

Opportunity cost is defined as what you must give up in order to obtain something else, the second best alternative.

Early economists were puzzled by contradiction between necessities and value. This was called the _____________________. Give an example.

Paradox of Value. An example of the paradox of value is water and diamonds. Water could be priced extremely high and people would absolutely buy it since it is necessary (yet it is not highly priced). However, diamonds are not necessary, yet we pay so much for them.

What do individuals and societies do in order to satisfy their unlimited wants in a world with scarcity? Explain.

People make choices! We need to make choices because everything that exists is limited. We have to figure out which of our wants we are going to prioritize over others.

Draw the circular flow model and label the following terms: Households, Businesses, Product Markets, Factor Markets, Money Payments, Money-Income Payments, Goods and Services, Productive Resources

See an image of the chart and try to piece it together.

Define the term utility.

The capacity to be useful and provide satisfaction.

What is scarcity? Explain in detail.

The condition of not being able to have all of the goods and services one wants, because wants exceed what can be made from all available resources at any given time.

What is the role of government in the circular flow of economic activity?

The government provides services that benefit both businesses and households. The government collects taxes from both households and businesses in exchange for the services the government provides. These services could include education and healthcare.

Describe the "problem of scarcity." Explain in detail.

The problem of scarcity refers to the question of how to satisfy wants despite not having the available resources at the time. The problem is that wants exceed what can be made from all available resources at any given time.

Goods can be both durable and nondurable, what does this mean?

The word durable means long-lasting; enduring. Goods can be both lasting, and not lasting. For example, toilet paper is an example of a good that is nondurable. The toilet paper will be used up in a few weeks. A car however is an example of a good that is durable. It will last you many years - at least 8 years or more.

What choices did you have to make in your daily life, what did you have to give up? Provide an example.

There are many choices I make in my daily life. A lot of my choices revolve around how to manage my time. The choice on whether to take a nap after school, what time I want to wake up in the morning, or how long I want to study. Elaborating on my choice to take a nap after school or not - I did gain a nice rest from it, but I did give up some extra study/homework time as a cost.

In economics, value refers to what?

Value refers to a worth that can be expressed in dollars and cents. For something to be valuable, it must be scarce and have utility.

To make wise economic choices, all societies must answer these three questions:

What to produce? How to produce it? For whom to produce it for?

If someone took you out for lunch and paid for it, is there a cost to you? Why or Why not?

Yes, there is a cost. Your TIME! In exchange for lunch, you are giving up your time - time is valuable.

What is the difference between Wants and Needs?

- Wants are everything other than basic survival needs. - Needs are items necessary/used for survival.