All Flashcards
What is scarcity?
The fundamental economic problem of unlimited wants/needs but limited resources.
Define economics.
The study of how individuals, firms, and governments manage scarcity.
What are trade-offs?
The choices we make due to scarcity; giving up something else.
Define opportunity cost.
The value of the next best alternative you give up when making a decision.
What is physical capital?
Inanimate resources like money, property, and inventories.
What is human capital?
The skills and knowledge of individuals.
Define Production Possibilities.
A table or graph showing the maximum combinations of two goods that can be produced with given resources.
What are factors of production?
The resources used to produce goods and services: land, labor, capital, and entrepreneurship.
Define a market economy.
An economy where buyers and sellers interact freely, based on Laissez Faire principles.
What is a mixed economy?
A combination of command and market economic elements.
How does scarcity affect a family's decision to buy a car?
Forces them to consider trade-offs, like vacation or other expenses.
How does opportunity cost relate to attending a concert?
It's the value of the best alternative activity you forgo.
How does scarcity affect a country with limited oil?
It must make choices about how to use and distribute the resource.
How does entrepreneurship contribute to economic growth?
By combining resources to create new goods and services, fostering innovation.
How does a mixed economy address market failures?
Government intervention can correct externalities and provide public goods.
How does scarcity impact healthcare?
Limited resources require choices about who receives treatment and what services are offered.
How does opportunity cost affect a student's decision to attend college?
It's the income they could have earned working instead.
How does scarcity influence government spending decisions?
Forces choices between funding different programs, like education or defense.
How does trade-off affect a company's decision to produce more of one product rather than another?
Producing more of one product means producing less of another.
How does opportunity cost affect a farmer's decision to plant wheat or corn?
It's the profit they could have earned from the crop they didn't plant.
What is the difference between microeconomics and macroeconomics?
Micro focuses on individual decisions; macro focuses on the entire economy.
Compare a command economy to a market economy.
Command: government control; Market: free interaction of buyers/sellers.
What is the difference between trade-offs and opportunity cost?
Trade-offs are all alternatives forgone; opportunity cost is the next best alternative.
Differentiate between physical and human capital.
Physical capital: inanimate resources; human capital: skills and knowledge.
Compare a market economy to a mixed economy.
Market: pure laissez-faire; mixed: some government intervention.
What are the differences between land and capital as factors of production?
Land: natural resources; capital: man-made resources used in production.
Compare a traditional economy to a command economy.
Traditional: based on customs; command: central planning by the government.
What is the difference between scarcity and a shortage?
Scarcity: permanent, limited resources; Shortage: temporary, quantity demanded exceeds quantity supplied.
Compare entrepreneurship to labor as factors of production.
Entrepreneurship: combining resources; labor: skills and abilities of workers.
What is the difference between a trade-off and a budget constraint?
Trade-off: general alternatives; budget constraint: limited income restricting consumption.