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Economics ch. 1-3
| Question | Answer |
|---|---|
| Define Economics | The study of how people try to satisfy their wants using scarce resources |
| Define scarcity | This is the basic economic problem. The lack of enough resources to satisfy everyone's wants |
| Talk about needs vs wants | needs are required and wants are unnecessary desires |
| What are he 4 factors of production | land, labor, capital, and entrepreneurship |
| talk about land | this includes the use of all types of natural resources |
| talk about labor | this includes all of the people working and utilizing all other skills in the production process |
| talk about capital | this includes all the tools, machinery, factories, etc. used in the production process |
| talk about entrepreneurs | they are special to labor and they come up with new ideas to bring to the market. without them, technical advance would be impossible |
| define financial capital | this is the money used to buy the capital (machinery used to produce goods) used in production |
| define production | this involves the coordination of land labor and capital to produce goods and services |
| define a good | goods are tangible products |
| define services | this is something that is done to provide aid, help, or comfort |
| what is a consumer good? | they are for the use of the consumer |
| what is a capital good? | these goods are used to manufacture goods and services |
| What is a durable good? | a good that lasts for more than 3 years of use like a car |
| what is a non durable good? | a good that does not last a long time like a pencil |
| what is a gross domestic product (GDP)? | this measures the value of all final goods and services produced in a nations borders over the course of one year |
| define value | what something means to us. The need for the item determines its value. If the item is used alot then its value is high because it is needed, but if the item has a low utility/use then its value is low |
| what does the paradox of value do? | it helps us understand why some things are worth more than others |
| define wealth | this measures how rich or poor a nation is. A nations wealth is measured by how many goods it produces/possesses |
| define market | this is anywhere a buyer and seller can exchange goods and services |
| what is a factor market? | where people derive their income, it can overlap with a product market |
| what is a product market? | where people go to acquire goods and services |
| what does the circular flow model do? | this helps illustrate how goods, services, money, and labor participate in the economy |
| when does economic growth occur? | when the flow of goods ans services generally increase, productivity allows for economic growth |
| define productivity | this is when each person becomes more capable of producing more while using similar resources |
| what increases as growth occurs? | standard of living |
| talk about division of labor | lowering the number of tasks per worker in the production process so that they become proficient |
| define specialization | becoming an expert at a certain task, this increases efficiency |
| define economic interdependence | the actions in one sector of the economy effect the other sectors |
| define trade offs | this happens in a economy with limited resources, when one thing is chosen something else must be given up |
| what is opportunity cost | it is when you give up money and resources to gain something better (EX: you give up money for a car) |
| what does the cost benefit analysis do? | it helps us make better financial decions |
| what is a production possibilities frontier? | it is a graph with 2 curves, the outside curve is what you could have done, but the inside curve is what you did |
| what is an economy? | an organized system for providing for the wants and needs of the countries citizens. |
| talk about a traditional economy | habits and customs often primitive and are used to organize the economy |
| what are the advantages and disadvantages of a traditional economy | A: everyone is taken care of D: nothing ever changes |
| what are the advantages and disadvantages of a command economy | A: they have the power to change D: peoples needs are ignored |
| what are the advantages and disadvantages of a market economy | A:everyone gets what they want D: not everyone gets taken care of |
| talk about a command economy | the system is based on central governmental control and planning. It is mostly found in communist or other totalitarian systems like north korea |
| talk about a market economy | consumers and businesses work for their own benefits in a system of voluntary exchange. This is seen in the US |
| define capitalism | private citizens own their own businesses, it is free enterprise so the government is hands off. |
| define voluntary exchange | the people are in charge of how to use the factors of production, they buy and sell freely within the market |
| talk about a mixed economy | the us is a mixed economy this means it has factors of a traditional, command, and market economy in it |
| define freedom as an economic goal | people can chose where to work and how to spend |
| define efficiency as an economic goal | scarce resources shouldnt be wasted |
| define equality as an economic goal | equal pay for equal work |
| define security as an economic goal | protection from job loss and injury |
| define employment as an economic goal | there is an availability of jobs for almost all the people |
| define stability as an economic goal | prices should not rise and fall in large intervals |
| define growth as an economic goal | steady economic growth and a rise in the standard of living |
| what are the 5 important pillars of free enterprise? | economic freedom,voluntary exchange, private property, profit motive, and competition |
| define economic freedom | consumers and businesses have a choice |
| define voluntary exchange | buyers and sellers expect benefit |
| define private property | people have the right to use and own property |
| define profit motive | money moves people to work and produce goods |
| define competition | makes products more numerous, better and cheaper |
| what is a consumers role in the economy? | they determine what products will be manufactured, and they vote on what companies will prosper with money |
| what is a governments role in the economy? | they regulate the markets to protect the system and consumers |
| what are the three means of organizing a business? | sole proprietorship, partnership, and corporation |
| define sole proprietorship | a business that is owned by one person |
| define partnership | owned by 2 or more people and the shares are not always equal |
| define corporation | it is a formal business structure and requires a government charter, it grants legal rights to individuals, it is governed by a board of directors |
| talk about stocks | stocks are parts of a corporation that people can buy and become stockholders, stockholders earn money in the form of dividends |
| define limited liability | the owner is not liable for something, it is an advantage of incorporating a business |
| define general partnership | everyone is involved |
| define limited partnership | everyone who is involved with the daily running of the company/corporation is involved |
| define merger | when 2 or more businesses combine to grow |
| what are the 2 types of mergers? | horizontal and vertical mergers |
| define horizontal merger | 2 similar firms merge to grow a business |
| define vertical merger | 2 dissimilar businesses come together to enhance efficiency |
| define a conglomerate | it is when a bunch of small businesses come together through mergers |
| what are the 2 types of corporations | profit and non profit |
| define cooperative | a corporation formed by like minded people |
| define consumer co-op | buy in bulk for members (sams club/cosco) |
| define service co-op | seeking to provide a service for its customers |
| define producer co-op | many producers coming together to promote their products |
| define a union | labor groups that represent the workers best interest they use collective bargaining to get better conditions for their workers |
| define professional association | like unions but NO collective bargaining, they are very professional, they seek to benefit the workers as individuals and the company as a whole |
| define chamber of commerce | they want to promote LOCAL businesses by advertising, making good community relationships, and lobby government |
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