Economics Ch. 1-3 – Flashcards
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There Is No Such Thing As A Free Lunch
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Where does TINSTAAFL stand for?
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The fundamental economic problem is scarcity
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What is the fundamental economic problem?
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-Land -Labor -Capital -Entrepreneurship
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What are the four factors of production?
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-What will we produce? -How will we produce? -For whom will we produce?
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What are the three basic questions of economics?
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-Description -Prediction -Analysis -Explanation
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What are the four key elements that are define the scope of economics?
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Alternatives that must be given up when one is chosen rather than another
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What are trade-offs?
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-Forces you to consider a number relevant alternatives -Requires you to identify the criteria used to evaluate the alternatives -Forces you to evaluate each alternative based on the criteria you selected
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What are three advantages of a decision-making grid?
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The cost of the next best alternative use of money, time, resources when one choices is made rather than another
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What are opportunity costs?
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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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What does a production possibilities frontier show?
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Economists use models to better understand the past or present and to predict the future
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How is the production possibilities frontier used by economists?
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A NEED is a basic requirement for survival and includes food, clothing, and shelter while a WANT is a way of expressing a need
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What is the difference between a need and want?
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A good is a tangible item of wealth meaning they can see it, touch it, feel it while service is an intangible item of wealth
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What is the difference between a good and a service?
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Goods and services that are useful, relatively scarce, and transferable to others
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What are economic products?
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Early economists; the situation where some necessities, such as water, have little more value, whereas some non-necessities, such as diamonds, have a higher value
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To what does the phrase paradox of value refer?
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Utility is not something that is fixed or measurable like weight or height
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What gives something utility?
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For something to have value, economists decided, it must be scarce and have utility
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What gives something value?
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Productivity: which productive resources are used efficiently; normally refers to labor, but can apply to all factors of production
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What term refers to the efficient use of productive resources?
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Ritual, habit, or custom
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From what does economic activity stem in a traditional economy?
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Is that everyone knows which rule to play
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What is the main strength of a traditional economy?
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It tends to discourage new ideas and new ways of doing things
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What is the main weakness of a traditional economy?
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They are made by government; the people have little, if any, influence over how the basic economic questions are answered
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Who makes most of the economic decisions in a commands economy?
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It can change direction drastically in a relatively short time
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What is the main strength of a command economy?
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-It is not designed to meet the wants of consumers -The system does not give people the incentive to work hard -Requires a large decision-making bureaucracy -It does not have the flexibility to deal with minor, day-to-day problem -People with new or unique ideas find it difficult to get ahead in a command economy
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What are five weaknesses of a command economy?
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In a market economy, people's decisions act as votes. When consumers buy a particular product, they are casting their dollar "votes" for that product
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How are economic decisions made in a market economy?
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-Overtime it can adjust to change -It's high degree of individual freedom -Relatively small degree of government interference -Decision making is decentralized, or not concentrated in the hands of a few -Incredible variety of goods & services available to consumers -The high degree of consumer satisfaction
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What are six strengths of a market economy?
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It does not provide for the basic needs of everyone in the society and it does not provide enough enough of the services that people value highly
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What are the two main weaknesses of a market economy?
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-Economic Freedom -Economic Efficiency -Economic Equity -Economic Security -Full Employment -Price Stability -Economic Growth
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What are seven broad social and economic goals of the United States?
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A federal program of disability and retirement benefits that covers most working people
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What is Social Security?
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Retires, survivors, disabled persons, and Medicare recipients are eligible for benefits
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What goal does Social Security support?
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A rise in the general level of prices
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What is inflation?
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People who live on a fixed income, find that bills are harder to pay and that planning for the future is more difficult
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What economic inflation does it run counter to?
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Most people hope to have a better job, a newer car, better clothes, their own home, and a number of other things in the future
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Why is economic growth a goal of most Americans?
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A policy that keeps foreign made shoes out of the U.S. could help the goal of full employment in the local shoe industry
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Give an example of how economists goals can conflict with each other,.
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-Capitalism -Where private citizens -Entrepreneurs -Own the factors of production
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What are four important characteristics of a market economy?
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The act of buyers and sellers freely and willingly engaging in market transactions
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What is meant by the term voluntary exchange?
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The profit motive the driving force that encourages people and organizations to improve their material well-being- based on capitalism
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What motivates people to improve their material well-being and by doing so drives a free enterprise economy?
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Because they organize and manages land, capital, and land in order to seek the reward called profit
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Why is the entrepreneur one of the most important people in a market economy?
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Because they are a rule of the consumer as a sovereign, or ruler, of the market
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Why is the consumer considered sovereign in a market economy?
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-Protector -Provider and Consumer -Regulator -Promoter of National Goals
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What four does government play in the American society?
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Because there are some elements of tradition in our economy
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Why is the American Economy referred to as a mixed economy or a modified private enterprise economy?
