Economics Chapter 1 & 2 Test Study – Flashcards

Flashcard maker : Shelby Arnold
What is Economics?
Economics is how individuals and nations choose to use their scarce resources to fulfill their needs and wants.
What is Scarcity?
Scarcity forces people to answer the following 3 questions: What, How and For Whom. Answering these questions will tell us how our scarce resources will be used.
What is the Scarcity Model?
Society — Biology

Determines wants and needs

Creates Scarcity

Forces Choices

Causes Costs

Monetary Costs — Opportunity Costs

What are the three basic questions in scarcity?
What To Produce, How To Produce, For Whom To Produce
Define the basic scarcity question: What To Produce?
Socks or Tanks
Shoes or Weapons
Define the basic scarcity question: How To Produce?
Methods
Define the basic scarcity question: For Whom to Produce?
Everyone, No one, or somewhere in between.
What is the Standard of Living?
Material Well – Being of an individual, group or nation.
What does TINSTAFL stand for? And what does in mean.
There is No Such thing as Free Lunch. There is a cost to Everything.
What is Opportunity Cost?
The Next Best Alternative
What is Trade off?
Something you give up
What is a economic resource?
Anything people use to make or obtain what they need or want
What are the factors of production?
Land, Labor, Capital, Entrepreneurship, and Technology
In the Factors of Production, What is Land?
Societies limited natural resources.
In the Factors of Production, What is Labor?
Workes who apply their efforts, abilities, and skills to production
In the Factors of Production, What is Capital
The Means by which something is produced such as money, tools, equipment, machinery, and factories.
In the Factors of Production, What is Entrepreneurship?
Risk Takes who combine the land, labor and capital into new products.
In the Factors of Production, What is Technology?
Results in highly skilled workers, leisure time, lower prices
In the Factors of Production, What is Production?
Creating goods and services — The result of land, capital, labor and entrepreneurs.
What is the Scope of Economics?
Description, Analysis, Explanation & Prediction
In The Scope of Economics, What is Description?
What does the world around us look like
In The Scope of Economics, What is Analysis?
Why things work and how things happen
In The Scope of Economics, What is Explanation?
Communicate the why and how
In The Scope of Economics, What is prediction?
Helps make future decisions
What is productivity?
The ability to produce goods and services in a better faster way
What is Economic growth?
The expansion of the economy to produce more goods, jobs, and wealth
Who were the three main people that are important as economists.
Karl Marx, Adam Smith & Milton Friedman
What are the four parts of the circular flow of Economic Activity?
Product Market, Individuals, Factor Markets & Businesses,
What is Value?
Belief or characteristic a person or group considers important
What is Utility?
Goods or services capacity to provide satisfaction.
What is Wealth?
The accumulation of goods that are tangible, scarce, useful and transferable to another person.
What is included in creating economic statistics?
Hypothesis, Graph, Table, Economic Model
What is a economic hypothesis?
Educated guess or prediction, starting point is defining the problem
What is a graph?
A visual presentation of statistical data
What is a table?
Presents data in columns according to topic
What is a Economic Model
Simplified representation of the real world
What is Production Possibility?
Shows the concept of opportunity cost and shows the combinations of goods and/or services that can be produced when all productive resources are used.
Who was Adam Smith?
Adam observed that labor becomes more productive as each worker becomes more skilled at a single job. He believed in the Laisse Faire which meant let it be. He also wrote the Wealth Of Nations
Who was Karl Marx?
Karl created surplus value and believed that in the struggle between the Rich & the poor
What is an Economic System?
A set of rules that governs what goods and services to produce, how to produce them and for whom they are produced.
What are the types of economic systems?
Traditional, Command, and Market
What is a traditional economy?
Roles and economic decisions defined by custom.
What are the advantages of a traditional economy?
Everyone knows which role to play and there is little uncertainty about WHAT, HOW and FOR WHOM to produce.
What is the disadvantage to a Traditional economy?
Society never develops
What is a Command Economy?
A central authority determines WHAT, HOW, and FOR WHOM to produce. Major economic decisions are made by the government.
What are the Advantages of a Command Economy?
They can drastically change directions at any time and little uncertainty for the citizens
What are the Disadvantages of a Command Economy?
Needs may not be met. Not rewarded for hard work. Little Flexibility.
What is a Market Economy?
Producers and consumers determine what, how and for whom to produce
What are some countries who have a Market Economy?
United States, Japan
What are the advantages to a Market Economy?
Ability to adjust to change, indivual freedom, little government involvement
What are the disadvantages to a Market Economy?
Unable to meet individual needs, poor systems like education and health care.
What type of economy does the US have?
Mixed Economy
What is a pure market economy?
No Government Control
What is a mixed exonomy
Contains characteristics of a command and pure market economy
What are the national goals of the united states?
A nationals values and goals determine that land of economic system that will develop within that nation:

1. Freedom
2. Efficiency
3. Equity
4. Security
5. Stability
6. Growth

What needs to happen in order to achieve national goals?
It requires sacrifice from members of society.
What are market economies based off of?
The Free Enterprise System and Capitalism
What is the Free Enterprise System?
Limited governement interference and businesses are free to compete.
What is Capitalism?
The system in which private individuals own the factors of production.
What is a characteristic of the US economy?
Economic Freedom, Profit Motive, Voluntary Exchange, Private Property, Competition, and Rule of Government
What are the Roles of a market economy?
Entrepreneur, Consumer and Government
What are the Roles of a market economy as an entrepreneur?
Use land, capital and labor to make profit. Encouraged by freedom, of choice and competition.
What are the Roles of a market economy as a consumer?
Ruler of the Market
What are the Roles of a market economy as a Government?
Interaction is needed to enforce laws. Regulates to preserve competition.
What is competition?
Offering similar goods of better quality or at lower prices to win more business.
What did Karl Marx believe in?
He believed in surplus value and the struggle between the rich and the poor.
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