The basic economic problem. Resources are limited, but human wants are unlimited.

The value of the next best alternative given up when making a choice. (e.g., if a country spends on "guns," it loses the "butter").

tools, machinery, and factories

Government controls production/prices (e.g., USSR).

Supply and demand determine prices (laissez-faire).

Most modern nations (including the U.S.) use a blend of both.

Microeconomics: Supply & Demand

Focuses on individual consumers and firms.

: As price increases, quantity demanded decreases (inverse relationship).

: As price increases, quantity supplied increases (direct relationship).

The point where supply and demand curves intersect

: How sensitive consumers are to price changes.

Luxuries (vacations, designer clothes).

Macroeconomics: The "Big Picture"

How the national economy is measured and managed

Gross Domestic Product (GDP):

Total value of all final goods and services produced within a country in a year

The general rise in prices. Measured by the Consumer Price Index (CPI).

• Unemployment Rate

The percentage of the labor force looking for work.

• Comparative Advantage

: A country should produce what it can make at a lower opportunity cost than others. This is the basis for free trade.

When the Dollar "strengthens," imports become cheaper, but U.S. exports become more expensive for foreigners.

Colonial era policy—colonies exist to provide raw materials to the Mother Country

• Industrial Revolution

Shift from hand tools to power-driven machinery; led to urbanization and the rise of labor unions.

• The Great Depression

Caused by overproduction, bank failures, and the 1929 Stock Market Crash. Led to Keynesian Economics (government spending to stimulate the economy).

Crucial for NY history; lowered transport costs and made NYC the nation's premier port

If a question asks about "the next unit," it’s talking about marginal utility or marginal cost.

Be able to identify what happens to the equilibrium price if the demand curve shifts right (price goes up) or the supply curve shifts left (price goes up).

Modern economics is global. Changes in oil prices in the Middle East will affect the CPI in New York.

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Economics CST words

Question	Answer
Scarcity	The basic economic problem. Resources are limited, but human wants are unlimited.
Opportunity Cost	The value of the next best alternative given up when making a choice. (e.g., if a country spends on "guns," it loses the "butter").
Land	Natural Resources
Labor	Human Effort
Capital	tools, machinery, and factories
Entrepreneurship:	Risk-taking and innovation
Command	Government controls production/prices (e.g., USSR).
Market	Supply and demand determine prices (laissez-faire).
Mixed	Most modern nations (including the U.S.) use a blend of both.
Microeconomics: Supply & Demand	Focuses on individual consumers and firms.
Law of Demand	: As price increases, quantity demanded decreases (inverse relationship).
• Law of Supply	: As price increases, quantity supplied increases (direct relationship).
• Equilibrium	The point where supply and demand curves intersect
• Elasticity	: How sensitive consumers are to price changes.
Inelastic	Necessities (medicine, gas).
Elastic:	Luxuries (vacations, designer clothes).
Macroeconomics: The "Big Picture"	How the national economy is measured and managed
Gross Domestic Product (GDP):	Total value of all final goods and services produced within a country in a year
Inflation	The general rise in prices. Measured by the Consumer Price Index (CPI).
• Unemployment Rate	The percentage of the labor force looking for work.
Cyclical:	Caused by recession
Structural:	Skills no longer match jobs.
Frictional:	: Between jobs (normal).
• Comparative Advantage	: A country should produce what it can make at a lower opportunity cost than others. This is the basis for free trade.
• Trade Barriers: * Tariffs	: Taxes on imports
Quotas:	Limits on quantity
Embargo	Total ban on trade
• Exchange Rates	When the Dollar "strengthens," imports become cheaper, but U.S. exports become more expensive for foreigners.
• Mercantilism:	Colonial era policy—colonies exist to provide raw materials to the Mother Country
• Industrial Revolution	Shift from hand tools to power-driven machinery; led to urbanization and the rise of labor unions.
• The Great Depression	Caused by overproduction, bank failures, and the 1929 Stock Market Crash. Led to Keynesian Economics (government spending to stimulate the economy).
• The Erie Canal	Crucial for NY history; lowered transport costs and made NYC the nation's premier port
• Think "Margins"	If a question asks about "the next unit," it’s talking about marginal utility or marginal cost.
• Graphs:	Be able to identify what happens to the equilibrium price if the demand curve shifts right (price goes up) or the supply curve shifts left (price goes up).
• Interdependence:	Modern economics is global. Changes in oil prices in the Middle East will affect the CPI in New York.

Created by: mrselting

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