Economics chapter 2

child labor, forced labor, slave labor, poor working condition, dangerous conditions, pollution

economists consider trade as mutually beneficial, but there are still serious problems associated with it such as:

When resources are used more efficiently, more items of value are able to be produced.

explain how producing an increased amount of goods from existing resources could increase prosperity.

they believed that governmental regulation stifle a nation's economy and that free economic competition lowers prices and prevents excessive profits. they advocated what is best for the individual is best for society.

explain why the french economists of the 18th century believed that government should not control a nation's economy?

Physiocracy

famous book written by Pierre Samuel du Pont

information

fifth factor of production

Adam Smith

founder of modern economics

physiocrats; economist

group that made the first attempt to create a science of the production, distribution, and consumption of goods

tariffs take place such high taxes on goods that people are often discouraged from bringing in foreign products

how do tariffs seek to restrict the amount of goods that are imported into a nation?

millions of goods; the model shows the comparison of efficiency of producing two items

how many different kinds of goods does a typical does a modern economy produce? and how is this relate to the production possibilities frontier model?

Unused resources can be used in other areas to increase wealth.

how might reducing people's wants increase the wealth of a nation?

labor

human activity which results in the creation of goods and services

trade

if nations specialize in making certain products, what is the most efficient way for them to obtain other products where they don't specialize in it?

Smith's law

if you use PPF graph to compare the value what are you looking at? what economic law its opportunity cost?

wealth

is the value of all things that people own- including money, property, capital goods, and consumer goods

opportunity cost

looking at the different combinations of production on a production possibilities frontier model allows you to exactly calculate the value of what economic principle?

mutually benefits

most economists agreed that trade and specialization do what?

what do you want?

most empires wars and human endeavors can be explained by economics if you just asked what question?

Venezuela, Cuba; Zimbabwe, Iran

name at least two nations that are less economically developed than they could be due to lack of trade

Wealth of Nations

name of Adam Smith's most famous book

labor

refers to work, whether physical or mental, that contributes to the production of goods and services

mixed economy

system that combines a good measure of free enterprise in some areas with heavy state regulation in others

tariffs

taxes that government apply only to imported goods

airplanes

the US is the world's leading producer and exporter of what?

trade balance

the difference in value of the goods that a country sells abroad compared to those it purchases from other countries

specialization

the division of tasks among workers allowed the production of goods by people doing the jobs they did best

factors of production

the economic resources used in the production of good; the four factors are natural resources, labor, capital and entrepeneurship

imperialism

the establishment of colonies and extensive territories created to benefit their mother countries

command economy

the factors of production are controlled by the government; they were labeled as Communist, socialist or other terms that describe a certain brand of government

laws of economics

the general rules or principles guiding the production, distribution, and consumption of goods

division of labor

the separation of work into individualized tasks

classical economics

the theories developed by economists of the 19th and early 201th centuries stating that the free market system facilitates the best possible balance between supply and demand

He was referring to the shared interests of producers and consumers that result in mutually beneficial choices that are the best for individuals and society.

what did Adam Smith mean when he used the term "invisible hands"?

it shows the value and costs of how we spend our time

what does a production frontier model demonstrates?

the comparative advantage is when you produce something that you're good at its better to trade of what you're not good at (specialize)

what does it mean to have a comparative advantage in production?

the benefit is that if you specialize on a producing the product that you're most efficient at, then you could produce more of that than any other nation.

what does it mean when you have absolute advantage in production?

increases productivity and efficiency

what does specialization of labor do?

they've taken it to the extreme; that we are more productive and efficient

what does the modern world done with the concept of specialization?

command

what economy lets the people to make their own economic choices, what kind of economy in which a centralized economy controls the production of distribution and goods?

Industrial revolution

what historical event caused humans populations to sustain improvement in living standards?

labor

what human activity results in creation of goods and services

a visual that helps explain concepts

what is an economic model?

Prosperity is the condition of enjoying many goods and services, while wealth is the value of all the things that are owned.

what is the difference between prosperity and wealth?

wealthy nation

what is the name of the book did Adam Smith published

division of labor

what is the separation of work to be performed given to the individuals to be more productive and efficient?

terrible

what kind of lives do the majority of humans who have ever lived have?

prosperity

what term refers to the enjoyment of many goods including services?

All the wealth of a nation has to be produced by intelligent labor.

why did Adam Smith conclude that labor is an extremely vital component of a prosperous economy?

mutually beneficial relationship

why did Adam Smith say brought producers and consumers together when they pursued their personal interests?

They thought that only land provided a clear surplus of wealth and that manufacturing merely changed the form of that wealth.

why did the physiocrats believe that the only true source of wealth is land?

human wants are unlimited while goods are limited. people cannot satisfy all of their wants

why is it necessary for people to make economic choices?

Goods can only be produced through some amount of labor. America's strong work ethic has led its citizens to develop the technology and methods needed for efficient production of goods.

why is work emphasized in this book? how has America's work ethic contributed to the wealth of the nation?

six ways given in the text that a nations have used in their attempts to increase wealth

-make things from resources that we already have -look for more resources to make more things -invent more things -make things even better -reduce wants -redistribute the goods that are already being produced among the population

Adam Smith

Who is considered to be first modern economist?

physiocrats

a French group of economic critics known as some of the earliest advocates of laissez-faire economics

laissez-faire

a French phrase meaning "let things alone"

entreprenuer

a person in effective control of starting or running a business or industrial undertaking

command economy

a system in which a centralized authority determines the production and distribution of goods as well as things like savings, investments and prices.

free enterprise economy

a system in which people are free to make their own economic choices

state capitalism

a system in which the power of much of the nation's capital is a powerful, centralized apparatus called the collective state

Both

according to the economic model explained in the video, when two nations are trading with one another, who benefits?

they can produce it at the lowest value they can give to us, which the opportunity cost for the other country is higher

according to the economic model explained in the video, why is it better for the US to trade with China to get shoes rather than manufacturing its own shoes?

command economy

also known as the planned or direct economy

mercantilism

an economic system that advocates the building up of the state's treasury with the goal of accumulating as much bullion as possible as possible; holds nation's wealth lies in its stockpiles of precious metals

subsistence economy

an economic system that provides barely enough to keep a society alive

market economy

another term for free enterprise economy

capitalist

anyone who owns producer goods or owns a share of some business that produces goods

prosperity

economic success, or the condition of enjoying many goods, including services

private capitalism

economic system in which the majority of a nation's capital is owned and controlled by the private individuals and businesses

the true source of prosperity

diligent work by ingenious intelligence allowed to develop under condition of freedom