What is Economics?

Scarcity

A fundamental economic problem facing all societies. A condition that results from having scarce resources and unlimited wants of people.

Economic Growth

A nation's total output of goods and services increases over time. The circular flow gets larger

Command Economy

An economic system where the basic economic questions are answered by the government.

Market Economy

An economic system where the basic economic questions are answered in the marketplace by buyers and sellers.

Traditional Economy

An economic system where the basic economic questions are answered the way they always have been.

Guns v. Butter

Common production possibilities for wartime

Basic Economic Questions

What, How, Who. Each society has to decide what to produce with their scarce resources, and how they are going to produce it. Finally, they need to decide who gets what is produced.

Product Market

Where goods and services are exchanged in the circular flow model

Factor Market

Where the factors of production are exchanged in the circular flow model

Need

A basic requirement for survival. Food, water, shelter.

Utility

A measure of satisfaction. Variable

Circular Flow Model

A simplified model that shows how business firms, individuals, money, resources, goods, and services flow through our economy.

ANWR

Alaskan National Wildlife Refuge

Laissez-faire

Belief that the government should have minimal interference with business.

Adam Smith

Famous economist believed in the invisible hand guiding the economy to help nations become wealthy. Also laissez faire, division of labor, and specialization

Consumer Goods

Products made the individual consumption

Want

Something that is desired, but not necessarily needed.

Modified private enterprise economy

The U.S. economy is mostly free enterprise, but is mixed with elements of other economic systems.

Opportunity Cost

The cost of the next best alternative when making a choice. 99% of students that came to school today say that their next best alternative was to be sleeping.

Inflation

The rising of prices

Value

Worth of a good or service as determined by the market

Productivity

A measure of the amount of output produced by a given amount of inputs in a specific period of time.

Trade-off

Alternatives that must be given up when something is chosen.

Production Possibilities Frontier

An economic model that shows what is possible to produce given a set of circumstances.

Mixed economy

An economic system that combines elements of different economic systems

Competition

Helps create better quality products and lower prices. Fundamental for free enterprise

Services

Work done for you. You don't usually receive a good. Ex. Auto repair

Factors of Production

Land or natural resources, labor or human resources, capital resources are the machines used for the production, and entrepreneurship will bring the factors together. All four parts are necessary.

Private Property Rights

The ability to own property allows people to use it for their own benefit. Fundamental for free enterprise

Consumer sovereignty

The customer is always right. Products will only be successful if they are wanted in the market place.

Gross Domestic Product (GDP)

The dollar value of all production within a country's borders.

Market

A place where buyers and sellers make exchanges

Economics

A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.

Capitalism-Free Enterprise

A system where private citizens own the factors of production

Voluntary exchange

A trade made in which both parties benefit

Profit Motive

Making money is the driving force behind the creation and continued development of products in the market place. Fundamental for free enterprise

Economic Freedom

People are free to choose how to use the factors of production

Division of Labor

Production tasks broken down into smaller parts. Should allow for workers to specialize and increase production

Capital Goods

Products manufactured to make other goods or services

Invisible hand

The market acts to help people make wise decisions. Businesses have to make and sell products that are needed or wanted to be able to be successful and allow for a healthy growing economy.