Unit 6~free Market And The Role Of The – Flashcards
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Economics
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The study how we make decisions in a world in which resources are limited
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Microeconomics
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Looks at the decision making of small businesses and individuals
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Macroeconomic
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Looks at the decision making of industries, societies and governments
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Economic system
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A way people produce the want and need
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Need
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Something someone has to have to live
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Want
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Something someone would like to have;a luxury
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What does scarcity refer to
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Not having enough resources to produce all the things we would like to have
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Scarcity
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Limited
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Shortage
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Short supply
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Because of scarcity, economics is often referred to as the 'science of decision making.' Why?
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All resources are limited,make decisions about how to use them
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Tradeoff
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Exchanging one thing for another, giving up something to get something
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Opportunity Cost
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Value of the next best alternative use of money or time when a decision is made
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Factor of production
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Resources necessary to produce goods and services
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Four factors of production
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Land: natural resources, unaltered by man Labor: Human Resources; mental and physical work Capital: manufactured tools used to make other goods Enterpreneurship: the organizer,risk taker; person who starts own business and invents
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Basic economic question
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What to produce? How to produce? For whom to produce?
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What influences how we use our resources
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Marginal Benefits: how much additional satisfaction we get when one more unit is produced Marginal Costs: additional cost of producing one more unit Cost-Benefit Analysis: comparing the marginal benefits to the marginal costs of a decision
