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Economics. Chapter 1

Study guide questions, and answers

What is economics? The study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants.
What is the difference between a want and a need? A need is what is needed to survive. -Food,clothing, and shelter. A want is everything that isn't necessarily needed like new cars and personal computers.
What is the meaning of scarcity? How is scarcity different from shortages? Scarcity means that people do not have and cannot have enough income, time, and other resources to satisfy their every want. Shortages are when demand is high but not enough is being produced.
What are the factors of production? Land, Labor, Capital, Productivity, Entrepreneurship, and Technology.
What is productivity? The ability to produce greater quantities of goods and services in better and faster ways.
What is a trade-off? Exchanging one thing for the use of another.
What is opportunity cost? The value of the next best alternative that had to be given up to do the action that was chosen.
What is a production possibilities curve? This is a curve that can help people and businesses determine how much of each item to produce, thus revealing the trade-offs and opportunity cost.
What is the meaning of economy? The production and distribution of goods and services in a society.
What is an economic model? A theory or simplified representation that helps explain and predict economic behavior in the real world.
What is hypothesis? An educated guess or prediction.
What are values? Values are the beliefs or characteristics that a person or group considers important such as religious freedom from want and so on.
What is an economic system? It is a way in which a nation uses it's resources to satisfy it's people's needs, and wants.
What are the three basic questions all economic systems must answer? What should be produced? How should it be produced? For whom should it be produced?
What are the four different types of economic systems? Traditional Economic System, Command Economic System, Market Economic System, and Mixed Economic System.
What is the circular flow of economic activity and how does it work? Model that shows pictures of income as flowing continuously between businesses and consumers.
What are the characteristics of a pure market economic system? A limited government makes it possible for individuals to decide for themselves the answers to the three basic questions. Individuals also choose what to buy with the income received from selling their labor and other resources.
What is capitalism? Another name for the market system. Pure capitalism has also been called a laissez-faire system.
What does laissez-faire mean? The French term means "Let people do as they choose."
What is another name for a free enterprise system? Capitalism.
Who is Adam Smith and what did he write? Adam Smith is an economist and he wrote an Inquiry into the Nature and Cases of the Wealth of Nations.
What is a profit? The money left after all the costs of production have been paid, including wages, rents, interest, and taxes.
What is the meaning of private property? Whatever is owned by individuals rather than by the Government.
What are the goals of the nation? Know the characteristics of each goal. Economic freedom, economic efficiency, economic equity, economic security, economic stability, and economic growth.
What are trade-offs among goals? In a world full of scarcity achieving national goals requires trade-offs. For example an program that provides economic security (medicare for example) uses resources that could have been directed elsewhere.
What are some rights and responsibilities of individuals in the American System? Government has become an important part of our economy individuals in our system have the responsibility of electing responsible government officials. This requires both knowledge and ability to analyze consequences of those policies.
Created by: meagandroke



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