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TINSTAAFL- There is no such thing as a free lunch. Someone has to pay for the production or service, so you may get an item or service free, but someone else had to pay for it.

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1. Explain why economists say there is no such thing as a "free" lunch.

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Scarcity is the fundamental economic problem. The wants are unlimited, but the resources are limited. It is not a scarcity of money but a lack of resources.

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2. Identify the cause of scarcity.

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1. What to produce? 2. How to produce? 3. For whom to produce?

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3. List the three basic economic questions each society must answer.

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Economics is a social science because it deals with the behavior of people as they cope with the fundamental scarcity.

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4. Explain why economics is considered a social science.

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the condition that arises because a society does not have enough resources to produce all the things people would like to have.

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scarcity-

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the study of human efforts to satisfy what appear to be unlimited and competing wants through the careful use of relatively scarce resources

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economics-

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a basic requirement for survival-food, clothing, shelter...

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need-

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a means of expressing a need

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want-

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land includes gifts of nature or natural resources: fields, forests, animals, sunshine, water, climate; these are fixed or in limited supply.

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land-

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capital includes goods such as tools, equipment, factories... and financial capital which is money that are used in production.

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capital-

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money used in production

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financial capital-

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people with all their efforts, abilities and skills

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labor-

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a risk taker in search of profits who combines the resources of land, labor and capital to produce new products.

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entrepreneur-

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process of creating goods and services with the combined uses of capital, entrepreneurship, labor, and land.

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production-

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dollar value of all final goods, services, and structures produced in one year with labor and property supplied by a country's residents, regardless of where the production takes place; the largest measure of a nation's income

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Gross Domestic Product (GDP)-

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Because time and resources are scarce, we cannot have everything we want. When we look at the options and choose one alternative over another, we have made a trade-off.

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1. Explain the meaning of a trade-offs.

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Opportunity cost is the cost of the next best alternative (money, time or resources) that we didn't choose in the trade-off.

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2. Describe the nature of an opportunity cost.

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It is used to illustrate opportunity cost. When resources are fully used, a country can produce anywhere along its production frontier. When all resources are not fully used, the country cannot reach it potential.

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3. Identify the economic concept illustrated by the production possibilities frontier.

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alternative choice because we cannot have everything we want

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trade-off-

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the cost of the next best alternative use of money, time or resources when one choice is made rather than another production possibilities frontier- a diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed.

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opportunity cost-

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a way of thinking that compares the costs of an action to its benefits

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cost-benefit analysis-

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an economic system in which consumers and privately owned businesses rather than the government jointly make the majority or of the WHAT, HOW and FOR WHOM decisions.

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free enterprise economy-

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the quality of life based on the possession of luxuries and necessities that make life easier

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standard of living-

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A need is required for survival, such as food. A want is a way to express that need such as an apple or a burger that will satisfy the need for food.

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1. Explain the difference between a need and a want.

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A free product is plentiful and has neither owner nor price, such as air or sunshine. An economic product is a good or service that is relatively scares and transferrable to others, such as a shirt or a haircut.

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2. Distinguish between free products and economic products.

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Services are intangible but wealth is not.

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3. Discuss why services are excluded when the wealth of a nation is measured.

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(CELL): Capital, entrepreneurs, labor, and land.

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4. Name the factors of production used in production.

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In a world of relatively scarce resources, productivity is a key issue. Economies benefit when productivity increases.

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5. Explain why economists argue that productivity is important.

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Individuals earn their income in factor markets and spend their income in product markets

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6. Distinguished between product markets and factor markets.

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Economic education helps people become better decision makers and it helps us understand the political and social issues operating around us.

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7. Explain why economic education is important.

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goods and services that are useful, relatively scarce and transferrable to others. These command a price.

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economic product-

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a tangible commodity like a book or car

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good-

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intended for final use by individuals

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consumer good-

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a manufactured good used to produce other goods

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capital good-

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work that is performed for someone such as haircuts, tutors... they cannot be touched or felt

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service-

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something that has worth that can be expressed in dollars and cents

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value-

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the apparent contradiction between the high value of nonessentials and the low value of essentials. (Ex. diamonds are expensive, but water is cheap)

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paradox of value-

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the capacity to be useful to someone

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utility-

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the sum of those economic products that are tangible, scarce, useful and transferrable from one person to another

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wealth-

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a location or other mechanism that allows buyers and sellers to deal readily in a certain economic product

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market-

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markets where productive resources are bought and sold (earn)

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factor market-

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markets where producers offer goods and service for sale (spend)

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product market-

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the efficient use of productive resources

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productivity-

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specialization when workers perform fewer tasks more frequently; same as specialization

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division of labor-

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assignment of tasks so that each worker performs fewer functions more frequently; same as division of labor.

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specialization-

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the sum of skills, abilities, health, and motivation of people

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human capital-

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the action of one part of the world or country have an impact on what happens elsewhere

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economic interdependence-

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Strengths-everyone knows what role they play; life is generally stable, predictable and continuous. Weaknesses-new ways of doing things are discouraged which lead to lack of progress and lower standard of living.

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1. Describe the main strength and weakness of a traditional economy.

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1. It is not designed to meet the needs or wants of individuals; rather they must sacrifice for the good of the state 2. It lacks incentives for people to work hard 3. It requires a large decision-making bureaucracy 4. It is not flexible to deal with day-to-day problems 5. People with new ideas find it difficult to get ahead

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2. List the five major weaknesses of the command economy.

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In a market economy, people's decisions act as votes for a product. More "votes" show producers what goods and services to offer. Producers are always looking for goods and services that consumers will by, so consumers influence production.

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3. Explain how consumers influence a market economy.

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Traditional economies don't change much because new ways of doing things are discouraged which leads to lack of progress and lower standard of living. Command economies can change relatively swiftly. Market economies take a longer time to adapt to change.

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4. Describe how a market economy, a traditional economy, and a command economy adapt to change.

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an organized way of providing for the wants and needs of the people in a society

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economy-

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an organized way of providing for the wants and needs of the people in a society

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economic system-

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allocation of scarce resources and almost all other economic activity stems from ritual, habit, or custom

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traditional economy-

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a central authority makes most of the WHAT, HOW, and FOR WHOM decisions.

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command economy-

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people and firms act in their own best interests to answer the WHAT, HOW, and FOR WHOM questions. Buyers and sellers exchange goods and services in a marketplace

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market economy-

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to make personal economic decisions

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1. Economic Freedom

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to use the scarce factors of production wisely.

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2. Economic Efficiency

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to ensure opportunities are just, impartial, and fair.

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3. Economic Equity

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to protect against economic adversity such as layoffs and illness.

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4. Economic Security

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so workers earn and income for themselves and produce goods and services for others.

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5. Full Employment

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to avoid inflation=a rise in the general level of prices and help those on fixed incomes= an income that does not increase even though prices rise.

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6. Price Stability

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so people can have more goods and services in the future.

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7. Economic Growth

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Social Security is a federal program that provides disability and retirement benefits that covers most working people.

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2. Identify the objective of Social Security.

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1. Increase in the minimum wage may increase economic equity, but that may raise unemployment and restrict employer's freedom to pay fair wages. 2. To fulfill the goal of full employment, foreign made goods may be kept out of the US, but that may work against consumers' freedom. 3. A new shopping center may be built to stimulate economic growth, but then the stability and security of smaller stores may be threatened.

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3. Explain how any two of the seven major economic goals might conflict.

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It is important to set economic goals so resources can be effectively and efficiently used to solve the problem of scarcity while meeting needs and wants. Economic goals serve as benchmarks that help people determine which economic system meets their needs.to make personal economic decisions.

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4. Explain the importance of setting economic goals.

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