Basic Economic Concepts Test Review
the demand in the economy, opportunity cost
How do you compute the cost of choosing one combination over another? (What is this called?)
shift ppc- new resources, trade, technology, education. Free enterprise, produce more capital goods.
How does a country promote economic growth?
shifting our resources from producing one item from the next results in a greater cost
Law of Increasing Opportunity Costs
Production Possibilities Curve (Frontier)
Production Possibilities Curve (Frontier)
some action or something to give so someone could act in a certain way
What are incentives?
where you process property
What are property rights?
is able to adjust to change gradually. Individual freedom for everyone. Notable lack of government interference. Decentralized decision making. Incredible variety of goods and services. High degree of consumer satisfaction
What are strengths of a market economy?
WHAT will be produced? HOW will it be produced? FOR WHOM will it be produced?
What are the 3 key economic questions?
sets forth certain economic roles for all members of the community. Sable, predictable, and continuous life
What are the strength of Traditional Economy?
capable of dramatic change in a short time
What are the strengths of a Command Economy?
discourages new ideas and new ways of doing things. stagnation and lack of progress
What are the weaknesses of Traditional Economy?
does not meet wants and needs of consumers. Lacks effective incentives to get people to work. Requires large bureaucracy (uses resources), Has little flexibility to deal with small day-to-day changes
What are the weaknesses of a Command Economy?
rewards only productive resources. Many people are too young, too old, or too sick to work. Must guard against market failures
What are the weaknesses of a Market Economy?
All the alternatives that we give up whenever we choose one course of action over another
What are trade-offs?
it would still cost or give something up
What does TINSTAAFL mean?
any point inside the curve represent an underutilization or inefficient use of resources
What does a point inside the PPC represent?
any point beyond the curve is unattainable
What does a point outside the PPC represent?
opportunity cost
What economic concept does the PPC represent?
bringing producers and buyers, all market making the decision on what is produced
What is Adam's Smith's Invisible Hand theory?
There Is No Such Thing As A Free Lunch
What is TINSTAAFL?
someone sits down and says we need to produce this and that and they plan out the economy (union)
What is a centrally planned economy?
government owns most property resources. Economic decision making occurs through a central economic plan
What is a command economy?
the system is characterized by: private ownership of resources, use of markets and prices to coordinate and direct economic activity, acting in one's own self- interest
What is a market economy?
is an economic system in which both state and private sector direct the economy
What is a mixed economy?
beliefs and customs determines the goods and products that are created. Used often in rural and farm-based areas
What is a traditional economy?
trading one service for another for free. Both are wiling and will benefit
What is a voluntary exchange?
all resources are being fully unitized
What is an efficient use of resources?
Individuals who use the other factors of production to produce a product. Examples they are innovative and take risks
What is an entrepreneur?
The next best alternative given up when a choice is made
What is an opportunity cost?
you have more resources than what you are using
What is an underutilization of resources?
Any human-made resource that is used to produce other goods and services. Examples are factories (plants), equipment, machinery, etc
What is capital?
pure capitalism, or laissez-fair capitalism, government's role would be limited to protecting private property, establishing an environment appropriate to the operation of the market system
What is capitalism?
it is the idea that consumers have the ultimate control over what is produced. This is because they are free to buy what they want and to reject what they don't want
What is consumer sovereignty?
All the human time, effort, and talent used to produce goods and services. Examples are workers and their skills
What is labor?
All natural resources used to produce goods and services. Examples are oil, minerals, land, trees, etc
What is land?
the extra benefit of adding one unit (MR greater than or equal to MC)
What is marginal benefit?
the extra cost of adding one unit
What is marginal cost?
1)It is the basic economic problem. 2)It is a situation that exists when there are not enough resources to meet human wants. 3)The principle that limited amounts of goods and services are available to meet unlimited wants
What is scarcity?
it is a situation in which people concentrate their efforts in the activities that they do best
What is specialization?
competition is the basic in a market system, you be more efficacy with lowing the prices
What is the role of competition in a market system?
It is the measure of the satisfaction derived from consumption of goods and services
What is utility?
philosopher, father of economic, division of labor
Who is Adam Smith?
law of increasing opportunity costs
Why is the PPC bowed out?