Economics Ch 1 Flashcard

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scarcity
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condition that results from society not having enough resources to produce all the things people would like to have
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economics
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study of how people try to satisfy seemingly unlimited and competing wants through the careful use of relatively scarce resources
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need
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basic requirement for survival
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want
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something we would like to have but isn't necessary
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factors of production
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resources required to produce things we would like to have
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land
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natural resources that aren't created by people (deserts, fertile, etc.)
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capital/capital goods
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tools, equipment, and factories used in production of goods and services
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labor
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people with all their efforts, abilities and skills
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entrepreneur
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individuals who start a new business or bring a product to market
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gross domestic product (GDP)
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dollar value of all final goods, services, and structure produced within country's borders during a one-year period
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good
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a useful, tangible item, relatively scarce and transferable to others (book, car, etc)
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consumer goods
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goods intended for final use by individuals rather than businesses
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durable good
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any good that lasts for at least 3 years when used on a regular basis
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nondurable good
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goods that wear out or lasts for fewer than 3 years when used regularly
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service
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work or labor performed for someone
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value
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monetary worth of a good or service as determined by the market expressed in dollars/cents
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paradox of value
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apparent contradiction b/w high monetary value of a nonessential item and the low value of an essential item
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utility
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ability or capacity of a good or service to be useful and give satisfaction to someone
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wealth
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sum of tangible economic goods that are scarce, useful, and transferable from 1 person to another
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market
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meeting place or mechanism that allows buyers and sellers to come together
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factor market
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market where the factors of production are bought and sold
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product market
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market where goods and services are bought/sold
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economic growth
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increase in nation's total output of goods and services over time
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productivity
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measure of amount of output produced w/ given amount of productive factors
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human capital
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sum of people's skills, abilities, health, knowledge, motivation
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division of labor
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division of work into a # of separate tasks to be performed by different workers
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specialization
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assignment of tasks to workers that can perform them more efficiently
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economic independence
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mutual dependency of 1 person's, firm's, or region's economic activities on another
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free enterprise
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capitalistic economy in which competition is allowed to flourish w/ a minimum of government interference
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voluntary exchange
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act of buyers and sellers freely and willingly engaging in market transactions
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private property rights
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fundamental feature of capitalism that allows individuals to own and control their possessions as they wish
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profit
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extent to which persons/organizations are better off financially at the end of a period than they were @ the beginning
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profit motive
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incentive that encourages people and organizations to improve their financial and material well-being
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competition
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the struggle among sellers to attract consumers
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consumer sovereignty
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role of consumer as ruler of the market when determining the types of goods and services produced
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mixed/modified free enterprise economy
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economy where people carry on their economic affairs freely but are subject to some government intervention and regulation
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TINSTAAFL
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there is no such thing as a free lunch
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3 basic questions of scarcity
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what to produce, how to produce and for whom to produce
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4 key elements to study of economics
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description, analysis, explanation, prediction
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why does everything we do have a cost?
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due to limited resources
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causes of scarcity
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unlimited wants, limited resources
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effects of scarcity
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making choices; the 3 basic questions
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why do products command a price?
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because economic products are goods/services are useful, relatively scarce and transferable
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what does that value of an item depend on?
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its scarcity/utility
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adam smith
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scottish social philosopher who pointed out the paradox of value
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what is a nation's wealth comprised of?
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of all tangible goods
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what connects individuals and businesses?
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the economic activity in markets
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circular flow of economic
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generates wealth
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what is the key to circular flow?
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the market
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where do individuals earn their incomes?
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in factor markets
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what factor is due to the nation's economic growth?
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when circular flow is larger with more factors of production, goods, and services in one direction and more payment in opposite direction (economic growth)
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what is the most important factor contributing to economic growth?
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productivity
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ways to increase productivity?
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invest in human capital, division of labor, specialization
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trade offs
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what people are faced with when they can't have everything thy want (alternative choices)
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what can cost also be thought of?
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in terms of opportunity cost, where the cost of the next best alternative use of $$, time, resources when 1 choice is made rather than another
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next best alternative
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choosing b/w 2 similar options
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how is opportunity cost illustrated?
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by production possibilities frontier (PPF)
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what does ppf show?
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the choices society must make in deciding how to use its relatively scarce resources, combo of resources to make 2 products, curve represents most efficient combo of resources
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what are the 2 assumptions of ppf?
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constant variables, maximum efficiency
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economic products designed for final use by people are called ______
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consumer goods
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the _____ of a cd player can be expressed in $, cents
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value
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haircuts and appliance repairs are examples of ______
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services
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_____ arises b/c society doesn't have enough resources to produce all things people would like to have
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scarcity
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the ______ of going to a football game instead of working would include $ not earned @ job
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opportunity cost
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______ is the sum of skills, abilities, health, and motivation of people
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human capital
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_____ is another name for the capacity of a product to be useful
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utility
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the only factors of production that are themselves result of earlier production are ________
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capital goods
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land, capital, labor, and entrepreneurs are _____
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factors of production
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_____ is the study of how people use limited resources to satisfy unlimited wants
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economics
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explain how the factors of production relate to one another
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all required for production. land: provide raw materials. capital: tools for production. labor: need people doing work. entrepreneurs: need people to organize the other 3 factors
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describe the paradox of value
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contradiction that useful necessities (like water) have a very low value while nonecessities (like diamonds) have very high value
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