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Economics Unit 1
| Term | Definition |
|---|---|
| Economics | The study of people and choices. |
| Microeconomics | The study of economics on a small scale. |
| Macroeconomics | The study of economics on a large scale. |
| Scarcity | Main economic problem in the world; When needs outweigh resources. |
| Choice | Any Decision between two or more alternatives. |
| Opportunity Cost | Next best alternative between two alternatives. Benefit lost in making a choice between two competing alternatives. |
| Trade-offs | Anything you give up in an opportunity cost situation. |
| Factors of production | Land, Labor, Capital, and Entrepreneurship. |
| Marginal Thinking | Cost benefit analysis. Requires decision makers to evaluate whether the benefit of one more unit of something is greater than its cost. |
| Production | Anytime something is created. |
| Possibilities Curve (frontier) | Graph used to show Opportunity Cost (PPF shows constant opportunity cost, PPC shows Varying Opportunity Cost) |
| Economic Systems | Mixed, Free Market, Command, Traditional. |
| 3 Basic economic questions | What to produce, How will it be produced, and who gets it? |
| Market economy | Supply and Demand drive this economy. Individuals answer the 3 economic questions. |
| Public goods and services | Commodity or service that is made available to all members of society. I.E Law Enforcement. |
| Circular flow diagram | Model that shows the flow of money through the economy. |
| Product Market | Market that has to do with what is being produced. |
| Factor market | Market that has to do with how things are being produced. |
| Households | Sellers in the market for resources. |
| Firms | Any company that seeks to make a profit by selling products or services. |
| What is scarcity? | When needs outweigh the resources. |
| What trade-offs appear on a production possibilities frontier? | Fixed Opportunity Cost (giving up the same amount of good X to receive more of good Y) |
| What are the similarities and differences of a command, market, and mixed economic system? | Each has some level of Government involvement, while only a market and mixed gives the individual power to make decisions. |
| How does each economic system answer the three basic economic questions of what to produce, how to produce, and for whom to produce? | Traditional; habits and customs. Free market; individuals. Command; Government. |
| What is the role of government in a market economy? | Regulate Commerce and keep the economy flowing. |
| How do goods and services flow in a market economy? | Households by products from the firms, firms use the money to create more products, that households than by again. Repeat cycle |
| What is the role of money in a market economy? | money is used as a store of value, unit of account, and medium of exchange. |
Created by:
heatherrb
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