Terms in this set (15)
the study of how trade and business functions; followed by financial patterns and spending
when unlimited wants exceed limited resources
when we are pressured with too little time or too little money, scarcity causes biases in our minds that exacerbate our problems
What? How? For whom?
The three central questions of economics are... (omit "to produce")
circular flow model
markets where goods and services are bought and sold
markets where the factors of production are bought and sold (borrow money, hire labor, buy land)
factors of production
productive resources that are required to produce things
land, labor, capital, entrepreneurship
The four factors of production are...
division of labor
the division of work into a number of separate tasks to be performed by different workers; facilitates specialization
with the division of labor, people get very good at a job and continue to do it
with specialization, people and companies are good at doing one thing, so they rely on others to fill the gaps
What is the value of the next best alternative? What are you giving up? (example: going to movies vs. studying)
- system in which the allocation of scarce resources and other economic activities are based on ritual, habit or custom
- advantages: everyone has a role, produce for family, tradition dictates lifestyle
- disadvantages: discourages new ideas/way of doing things, strict rules, stagnation (lower standard of living)
- system with a central authority that makes the major economic decisions; led by a king, dictator, president, etc.
- government makes most decisions, limits private property rights, limits individual freedom, government tends to favor itself
- advantages: can change drastically (progressively), health and public services available to all with little cost