Economics Chapter 1

land

"gifts of nature" or natural resources not created by humans. includes deserts, fertile fields, forests, mineral deposits, livestock, sunshine, and the climate necessary to grow crops. (limited supply)

what is the difference between a durable good and a non durable good

durable good is an item that lasts three years or more when used on a regular basis they include both capital goods and consumer goods nondurable good is an item that lasts for less than three years when used on a regular basis such as food, writing paper, and most clothing items

discuss the relationship among scarcity value, utility, and wealth

for something to have value, economists decided it must be scarce and have utility and to afford the greater value you must have wealth

economic product

goods and services that are useful, relatively scarce (economic sense so require a price), and transferable to others

how does scarcity affect your life? provide several examples of items you had to do without because of limited resources. explain how you adjusted to this situation. for example, were you able to substitute other times for those you could not have?

in California we are in a drought, which means I cannot wash my car or use the sprinklers so we have placed turf in parks and lawns to compensate.

describe the circular flow of economic activity

individuals earn their incomes in factor markets, after individuals receive their income from the resources they sell, they spend it in product markets, the money individuals receive from business in the factor markets returns to businesses in the product markets, businesses then use this money to produce more goods and services.

consumer good

intended for final use by individuals

explain why the study of economics is important to the america free enterprise system

it will provide a working knowledge of property rights, competition, supply and demand, the pricy system, and the economic incentives that make the American economy function. unemployment, the business cycle, inflation, productivity, and economic growth will be covered. the role of business, labor and government in the American economy are studied as well as the relationship of the United States economy to the international community

good

item that is economically useful or satisfies an economic want (book, car, cd player)

describe the factors of production

land-includes the gifts of nature or natural resources not created by human effort capitol-includes the tools, equipment, and factories used in production labor-includes people with all their efforts and abilities entrepreneurs-are individuals who start a new business or bring a product to market

opportunity cost

the cost of the next best alternative use of money, time, or resources when one choice is made rather than another

factor market

the markets where productive resources ar bought and sold

financial capital

the money used to buy the tools and equipment used in production

production

the process of creating goods and services. takes place when all factors of production are present

standard of living

the quality of life based on the possession of the necessities and luxuries that make life easier.

paradox of value

the situation where some necessities, (water) have little monetary value, where as some non-necessities (diamonds) have a much higher value

economics

the study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources.

capital

the tools, equipment, machinery, and factories used in the production of goods and services (result of production-bulldozer, cash register, computers)

explain what people try to achieve when they make decisions or trade-offs

they want to consider all their alternatives and if using a grid you can compare durability, approval, future expenses, and utility

want

way of expressing a need

provide at least three examples each of specialized workers and capital that are used in your school to provide the service of education. would productivity go up or down if these specialized capitals goods and workers were not available to your school. explain

we have specialized teachers for each subject which costs more due to the more faculty

economic growth

when a nation's total output of goods and services increases over time

capital good

when manufactured goods are used to produce other goods and services (oven in a bakery, computer in a high school, robot welder in a factory)

service

work that is performed for someone (haircuts, home repairs, forms of entertainments, doctors, lawyers, teachers)

utility

the capacity to be useful and provide satisfaction (can vary from one person to next)

scarcity

the condition that results from society not having enough resources to produce all the things people would like to have

identify several possible uses of your time that will be available to you after school today. what will you actually do, and what will be the opportunity cost of your decision? explain how your decision will not affect your friends and members of you family.

I could sit on my phone or watch tv and be unproductive, I could do homework, I could relax, I could get ready for dance early, I could skip dance or I could go to dance, I could cook a meal at home, or go out. I will actually eat at home and be productive and it will cost me nothing except time.

list the three basic economic questions every society must answer

WHAT to produce HOW to produce FOR WHOM to produce

market

a location or other mechanism that allows buyers and sellers to exchange a certain economic product (local, regional, national, or global, or cyber)

productivity

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

WHAT to produce

a society cannot have everything its people want, so it must decide WHAT to produce

describe the relationship between trade-offs and opportunity costs

a trade-off are all your alternative choices where the opportunity cost is the next best alternative you did not choose that you missed out on

cost-benefit analysis

a way of thinking about a problem that compares the costs of an action to the benefits received

value

a worth that can be expressed in dollars and cents

gross domestic product (GDP)

dollar value of all final goods and services, and structures produced within a country's borders in a 12 month period.

wealth

accumulation of those products that are tangible, scarce, useful, and transferable from one person to another

trade-offs

alternative choices to an economic decision

need

basic requirement for survival and includes food, clothing, and shelter

list the decision making strategies that economists use

cost-benefit analysis taking small incremental steps toward the final goal

list the four key elements of economics

description analysis explanation prediction

production possiblities frontier

diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed

product market

markets where producers sell their goods and services to customers

HOW to produce

mass production methods that require lot of equipment and few workers, or less equipment more workers, lower costs make manufactured items less expensive and therefore available to more people

FOR WHOM to produce

must be allocated to someone, workers, professional people, government employees

free enterprise economy

one in which consumers and privately owned businesses, rather than the government, make the majority of the WHAT, HOW, and FOR WHOM devisions

labor

people with all their efforts, abilities, and skills (includes all people except entrepreneurs) may vary in size over time due to factors such as population growth, immigration, famine, war, and disease.

explain why productivity is important to economic growth

productivity goes up when ever more output can be produced with the same amount of inputs in the same amount of time

factors of production

resources required to produce the things we would like to have include land, capital, labor, and entrepreneurs

entrepreneur

risk-taker in search of profits who does something new with existing resources, the driving force in an economy because they exhibit the ability to start new business or bring new products to market. they provide initiative that combines the resources of land, labor, and capital into new products

describe the fundamental economic problem

scarcity or the condition that results from society not having enough resources to produce all the things people would like to have

specialization

takes place when factors of production perform tasks that they can do relatively more efficiently than others

division of labor

takes place when work is arranged so that individual workers do fewer tasks that before