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Lopez/Guthrie - Econ
Unit 1 - Introduction to Economics
| Question | Answer |
|---|---|
| Scarcity | the permanent state of there only being a limited amount of resources to meet unlimited wants. |
| Shortage | a temporary state that may be short or long-term that occurs when producers will or can not provide goods or services at the current costs. |
| Biggest difference between Scarcity and Shortage? | Scarcity is a permanent state, a shortage is only temporary. |
| Four Factors of Production | The resources used to make all of the goods and services we use: Land, Labor, Capital, & Entrepreneurs |
| Physical Capital | buildings and tools |
| Human Capital | worker gaining knowledge through training or education |
| Opportunity cost | the lost benefit of our next best alternative; it is a trade-off; the alternative we give up when making a choice |
| What could be the opportunity cost of buying a new shirt? | The opportunity cost of a new shirt is the benefit of something else you wanted but now can’t have |
| What is meant by the “guns or butter” analogy? | A country may decide to produce more military goods instead of consumer goods. |
| What is "Thinking at the Margin"? | Making a decision based on the additional costs or benefits |
| What does a production possibility curve (PPC) show? | Illustrates the range of production options, efficiency, and opportunity costs |
| How is deciding how much to study for a test an example of the economic decision called “thinking at the margin”? | Deciding to study for two more hours than normal for a test or deciding to watch two hours of TV instead would be an example of “thinking at the margin." |
| Name the three key economic questions. | 1)What goods and services shall be produced? 2)How shall the goods and resources be produced? 3)Who consumes the goods and services? |
| Name the three types of economic systems. | 1) Market 2)Command 3)Traditional |
| Give examples of how the United States uses parts of all three economic systems. | - Market: buying stock - Command: paying taxes - Traditional: celebrating Halloween |
| Compare and contrast the product market and the factor market | In the product market, households buy a product or a service from a firm using money. In the factor market, firms buy land, labor and capital from a household in return for money. |
| What were characteristics of life in the Soviet Union’s centrally planned economy? | Low wages, expensive goods, shortages on consumer goods, low quality of goods, lack of variety of goods. |
| Compare and contrast Socialism and Communism. | In both Socialism and Communism there is a high level of central control of the economy by the government (command economy). However in Socialism, the government is elected democratically, whereas in communism, the government is authoritarian. |
| Economics | the study of how we use scarce resources to satisfy our wants. |
| Specialization | the concentration of the productive efforts of individuals and firms on a limited number of activities. |
| “The Invisible Hand” | the name Adam Smith gave to the phenomenon of consumers getting the products they want at prices close to the cost of production without any central plan or direction. |
| Laissez faire | the doctrine supported by Adam Smith that preaches that government should not interfere in the marketplace. Literally, “Let them do as they please.” |
| Consumer sovereignty | means that the consumer is king and consumers answer the three economic questions. |
| Self-interest | acting to benefit one’s self (different than selfishness). |
| Government interventions | government influencing business and consumers though government agencies and policies. |
Created by:
cmguthrie35
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