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economics Unit 1
| Term | Definition |
|---|---|
| Resources are limited, but human wants are unlimited | scarcity |
| All the alternatives you give up when you make a choice. | trade-off |
| The next-best alternative you give up when making a choice. | opportunity cost |
| You have $20 and choose to buy shoes instead of going to a movie. | opportunity cost = the movie |
| You spend Saturday studying instead of playing soccer, hanging out with friends, watching TV | trade-offs |
| The 4 factors of production | land, labor, capital, entrepreneurship |
| Three big questions that economic systems ask: | What to produce? How to produce? Who gets the product? |
| All natural resources used to produce goods and services. | land |
| The physical and mental effort people use to produce goods and services. | labor |
| Tools, equipment, buildings, and technology used to produce goods and services. | capital |
| The ability to organize resources, start a business, and take risks. | Entrepreneurship |
| When a person, business, or country focuses on producing a specific good or service that they can produce relatively efficiently. | Specialization |
| private property, economic freedom, consumer sovereignty, competition, profit, voluntary exchange, limited gov. involvement | 7 traits of a market economy |
| An economic system where individuals and businesses make most economic decisions. | market economy |
| An economic system where the government makes most economic decisions. | command ecnomy |
| An economic system where both the government and individuals/businesses make economic decisions. | mixed economy |
| protect property rights, manage externalities, provide public goods, reduce recessions/grow the economy, fix market failures | five roles of the government |
| As you produce more and more of one good, you have to give up increasingly larger amounts of the other good (very diff resources) | increasing opportunity cost (graph) |
| a producer/country can produce a product at a lower opportunity cost | comparative advantage |
| a person, company, or country can make a product better, faster, or using fewer resources than someone else. (who is just better at doing the thing) | absolute advantage |
| idea that people pursuing their own self-interest can unintentionally benefit society through markets. | Invisible Hand |
| The government’s way of using interest rates and money to control the economy. | Monetary Policy |
| The government changes spending and taxes to control the economy. | Fiscal Policy |
| Something that encourages or discourages a person to take an action. | Incentives |
| Let the economy fix itself | Laissez-faire |
| An incentive that makes people do the opposite of what was intended. | Perverse Incentive |
Created by:
savannah hindman