Econ Ch.1 Benchmark Notes
What were Adam Smiths 4 main pieces of economic framework?
-Division of labor -Specialization -Human capital -Nation's wealth = sum of goods produced
What is a capitol good?
Good used to create other goods/services
What are economic products?
Goods and services that are useful, relatively scarce, and transferable to others
How did Smith believe that Capitalism causes people to do better work?
He believes that if people have to rely on their work for survival they will unconsciously work harder (Self interest will cause people to work harder
How do you increase your productivity possibility frontier?
Increase resources, increase productivity, technology
What is a consumer good?
Intended for final use by an individual
Scarcity causes prices to _________
Rise
What is the fundamental economic problem?
Scarcity
What do businesses do in the product market?
Sell goods and services
What do individuals do in the factor market?
Sell land, labor, capitol, or/and entrepreneurship
What is Division of labor?
Separate job into tasks
What is economics?
The study of how people try to satisfy seemingly unlimited wants through the careful use of relatively scarce resources.
What is a durable good?
good that lasts 3 years or more when used regularly
Definition of ECONOMIC GROWTH
increase in a nation's total output of goods and services over time
What is utility?
the capacity to be useful and provide satisfaction
Definition of CAPITAL
tools, equipment, and factories used in the production of goods and services; one of the four factors of production
Service
work that is preformed for someone
What is Specialization?
Get better at performance of 1 thing
What is a nondurable good?
A good that lasts less than 3 years when used regularly
Who is the father of economics?
Adam Smith
What is wealth?
All assets except services
What is productivity?
Amount of output with given amount of resources
What do individuals do in the product market?
Buy goods and services
What was the Wealth of Nations book the blueprints for?
Capitalism
Types of Goods
Capitol, Consumer, Durable, Non-Durable
What are the four parts of the study of economics?
Description, Analysis, Examination, Prediction
What are the 2 things that the government should do in the invisible hand theory?
Enforce agreements and provide public goods
In all societies, the government decides what to produce (True or False)
False
What is scarcity?
Limited resources for unlimited wants.
What are the 5 key components of economic growth?
Productivity Human Capitol Division of Labor Specialization Economic Interdependence
What do businesses do in the factor market?
Purchase the land, labor, capitol, and entrepreneurship
What is a standard of living?
Quality of life based on ownership of necessities and luxuries that make life easier
What is Economic interdependence?
Rely on one another for economic products.
What is Human Capitol?
Sum of people with skills and abilities
What are the 7 consumer rights?
To be informed, to choose, to safety, to be heard, to have problems corrected, to consumer education, to services
What is value?
To have monetary value, a good must be scare and have utility for the person purchasing it
All societies are faced with the problem of scarcity (True or False)
True
Goods
Useful tangible item that satisfies a want
What is the name of Adam Smith's most famous book?
Wealth of Nations
What are the three basic economic questions?
What to produce? How to produce? For whom to produce?
What is a Free Enterprise Economy?
When private businesses seeks a profit with limited government intervention and the businesses make the What, how, and for whom decisions
What is a lost liter?
When the business earns no profit margin on an item, but they make up for it because people will also buy items with a large profit margin.
Definition of CONSUMERISM
a social movement that was aimed at promoting the interests of consumers
Definition of TRADE-OFFS
alternative that must be given up when one choice is made rather than another
What is the paradox of value?
apparent contradiction between the high value of a nonessential item and the low value of an essential item (diamonds/water)
Definition of OPPORTUNITY COST
cost of the next best alternative use of money, time, or resources, when one choice is made rather than another
Definition of PRODUCTION POSSIBILITIES CURVE
diagram representing all possible combinations of goods and/or services an economy can produce when all productive resources are fully employed
What does the "invisible hand" mean?
it means the self-interested individuals will produce what is valued by society the most without the direction of a central authority. aka govt should stay out, people do what they want
Definition of PRODUCTIVITY
measure of the amount of output produced in a specific time period with a given amount of output produced in a specific time period with a given amount of resources; normally refers to labor, but can apply to all factors of productions
Definition of MARKET
meeting place or arrangement through which buyers and sellers interact to determine price and quantity of an economic product; may be local, regional, national, or global
Definition of LAND
natural resources or "gifts of nature" not created by human effort; one of the four factors of production
Definition of LABOR
people with all their abilities and efforts; one of the four factors of production; does not include the entrepreneur
Definition of FACTORS OF PRODUCTION
productive resources needed to produce goods; the four factors are land, capital, labor, and entrepreneurship
Definition of ENTREPRENEURS
risk-taking individuals who introduce new products or services in search of profits; one of the four factors of production
