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Eco-Unit 1
| Question | Answer |
|---|---|
| What is economics? | the study of how people choose from limited resources to meet their needs and wants..it's all about making good choices. |
| microeconomics | the study of how individuals & firms deal with scarcity. |
| macroeconomics | the study of how society as a whole deals with scarcity |
| good | physical objects that can be purchased |
| services | actions or activities performed for a fee |
| consumers | people who purchase goods & services |
| producers | people who supply goods & services |
| resources/factors of production | land, labor, capital, entrepreneurship |
| land | natural resources that are used to make goods/services. this includes land as well as ores, minerals, plants, animals, & water..the payment=rent |
| labor | includes all human resources, both physical/mental. payment=wages |
| capital | a human-made resource used to produce other goods & services. includes tools, machines, factories, buildings, equipment..payment=interest |
| entrepreneurship | the special ability of risk-takers to combine land, labor, & capital in new ways to make new goods & services in order to make a profit..payment=profit |
| the fundamental problem of economics.. | scarcity. we face trade-offs when it comes to using available resources. |
| opportunity cost | the value of a product forgone to produce or obtain another product. Nothing is free..everything has a cost. |
| why do we have economic systems? | survival for any society depends on its ability to provide food, clothing, & shelter for its people. the economic system is the organized way a society provides for the wants/needs of its people |
| what 3 questions will an economic system answer? | what goods & services to produce? How to produce? & for whom to produce? |
| four economic systems.. | traditional economy, command economy, market economy, mixed economy |
| traditional economy | economic activity is based on ritual, habit & custom |
| strengths/weaknesses of traditional economies.. | everyone knows their role..little uncertainty over what to produce or how to produce..life is generally stable, predictable, & continuous. weaknesses: tends to discourage new ideas; lace of progress leads to lower standard of living |
| command economy | central authority makes most economic decisions..economic decisions are made at the top & the people are expected to go along with choices their leaders make |
| strenghths/weaknesses of command economy.. | change direction drastically in a relatively short time..weaknesses=not designed to meet wants/needs of individuals, lack of incentives to work hard; large bureaucracy; not flexible |
| command economy | central authority makes most economic decisions..economic decisions are made at the top & the people are expected to go along with choices their leaders make |
| command economy | central authority makes most economic decisions..economic decisions are made at the top & the people are expected to go along with choices their leaders make |
| strenghths/weaknesses of command economy.. | change direction drastically in a relatively short time..weaknesses=not designed to meet wants/needs of individuals, lack of incentives to work hard; large bureaucracy; not flexible |
| Market economy | People in films act in their own best interest into economic questions. Markets allow buyers and sellers to come together in order to exchange goods and services. In a market economy, economic decisions are made by individuals and are based on exchange or |
| strengths/weaknesses of market economies | Strengths -- markets can adjust over time, freedom exists for everyone involved, decision-making is decentralized, variety of goods and services are produced, high degree of consumer satisfaction. WEAKNESSES: the primary weakness is deciding for whom to p |
| property rights | refer to the legal ownership of resources, which include the right to own, use, & sell them. a market system cannot function well w/o clearly defined property rights |
| efficiency requires full employment. full employments means.. | all available resources should be employed. |
| full production | implies two kinds of efficiency: productive & allocative |
| Production possibilities frontier | the boundary between the combinations of goods & services that can be produced & those that cannot be produced, given the available factors of production & technology |
| in a growing economy the PPF shifts.. | outward |
| why do nations trade? | b/c economic resources are distributed unevenly throughout the world, nations specialize in producing certain goods & services, then trade to acquire the goods & services that they cannot produce |
| specialization in production & trade between countries generates.. | higher standards of living for the countries involved. it increases productivity & allows for greater total output than would otherwise be possible |
| absolute advantage | a person/nation has an absolute advantage when it can produce more of a given product using a given amount of resources |
| should a country still trade even if it has an absolute advantage in all ecomonic activities? | Yes! Nations should specialize in producing goods & services for which they have the lowest opportunity cost. this is called the law of comparative advantage. |
| comparative advantage | the principle which holds that every country should produce & trade the good. occurs when it focuses on producing the good in which the opportunity cost of production is lowest |
| trade barriers | a means of preventing a foreign product or service from freely entering a nation's territory. trade barriers take 3 common forms: import quotas, voluntary export restraints, & tariffs |
| import quota | a limit on the amount of a good that can be imported. a law |
| voluntary export restraint | a self-imposed limitation on the number of products that are shipped to a particular country |
| tariff | a tax on imported goods. individuals & businesses have to pay tariffs. |
| effects of trade barriers: | increased prices for foreign goods & trade wars |
| why does a country impose trade barriers? | protects jobs, protects infant industries, safeguard national security |
| GATT | general agreement on tariffs & trade: established to reduce tariffs & expand world trade |
| WTO | world trade organization: founded to ensure compliance w/ GATT, to negotiate new trade agreements, and to resolve trade disputes |
| european union | established to abolish tariffs & trade restrictions among western european nations. |
| NAFTA | north american free trade agreement. eliminates all tariffs & other trade barriers between canada, mexico, & the US by 2009 |
Created by:
stephparnell
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