Essay about Economics Chapter 1
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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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the 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, food, shelter, clothing
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want
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something you would like to have, but is not necessary for survival
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capital
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the tools, equipment, machinery and factories used in the 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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risk taker in search of profits who does something new with existing resources
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capitalism
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economic system in which private citizens own and use the factors of production in order to generate profits
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wealth
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the accumulation of products that are tangible, scarce, useful and transferrable from one person to another
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market
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a location or other mechanism that allows buyers and sellers to exchange a specific product
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factor markets
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where the factors of production are bought and sold
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product markets
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markets where producers sell their goods and services
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division of labor
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a way of organizing work so that each individual worker competes a separate part of the work
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specialization
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takes place when factors of production perform only tasks they can do better or more efficiently than others
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trade offs
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alternative choices
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opportunity cost
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cost of the next-best alternative
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standard of living
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the quality of life based on the ownership of the necessities and luxuries that make life easier
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free enterprise economy
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one in which consumers and privately owned businesses, rather than the government, make majority of the what, how and for whom decisions
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service
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work that is performed for someone
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utility
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the capacity to be useful and provide satisfaction
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value
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worth of a good or service as determined by the market
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production possibilities frontier
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diagram representing various combinations of goods and services an economy can produce when all its resources are in use
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Describe the fundamental economic problem
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The fundamental economic problem is that societies do not have enough productive resources to produce everything people want, aka scarcity.
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List the three basic economic questions every society must answer
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What, how, and for whom to produce
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Describe the factors of production
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Land, capitol, labor and entrepreneurs. Land-resources not created by people. Capital- equipment, machinery, tools and factories used to produce. Labor- people and all of their skills work and abilities. Entrepreneurs- singled out from people in labor because they take risks and use resources in new ways to make a profit
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What are the four elements of economics
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description, analysis, explanation and prediction
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Discuss relationship among scarcity, value, utility and wealth
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The value of a good or service depends on its scarcity and utility. The good must have utility and value to have monetary value. Wealth is the accumulation of these tangible and useful goods.
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What is the circular flow of economic activity
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Money consumers spend goes to product markets which flows into business income, this income turns into business payments for resources which are paid to the factor markets, factor markets get this money back to the individual by means of income from resources.
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Describe the relationship between trade-offs and opportunity costs
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Trade offs are alternative choices we can make. Opportunity costs are choices that are the next best alternative to the good/service that is chosen
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Why is the study of economics important?
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The study of economics is important because it helps people become better citizens by helping us become better at making decisions.
