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Chapter 1 Guided Reading
Guided Reading Chapter 1 Sections 1-3. The Basic Problem In Economics. Trade-Offs. What Do Economists Do?
Terms in this set (25)
___(1)___ is the study of how individuals, families, business, and societies use limited __(2)__ to fulfill their unlimited wants.
Economists consider everything other than basic survival needs to be a _(3)_. this includes TVs, VCRs, computers, and automobiles.
People, businesses, and societies make choices that utilize resources and affect the production of _(4)_ and _(5)_. However, there exists a problem of _(6)_, in which people do not have enough income, time, and other resources to satisfy their every want.
When economists refer to scarce resources, they are referring to the _(7)_, which are the resources necessary for the production of goods and services.
7. factors of production
_(8)_ is a natural resource present without human intervention. The work people do is _(9)_, often referred to as a human resource.
_(10)_, which are tangible items, and _(11)_, activities done for others for a fee. The third factor of production is _(12)_ - manufactured goods used to produce goods and services.
Individuals who take the initiative to start a new business or introduce a new product are demonstrating _(13)_, the fourth factor of production.
Today, some economists consider _(14)_, or the use of science to produce goods and services, an additional factor of production.
What is a trade-off?
Exchanging one thing for the use of another.
What does an opportunity cost cause a person to lose?
the ability to engage in your next highest valued alternative.
What is important to know before one makes a decision related to their available resources?
Be aware of trade-off and their resulting opportunity costs.
What is a production possibilities curve?
Shows the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
The classic example for explaining the production possibilities curve shows the relationship between what two factors?
The trade-off between military defense and civilian goods.
What benefit is there from a nation, business, or individual using the production possibilities curve?
A nation, business, or individual can decide how best to use its resources.
Describe the two large fields into which economics is divided.
Microeconomics - the branch of economic theory that deals with behavior and decision making by small units.
Macroeconomics - deals with the economy as a whole and decision making by large units.
What is the purpose of an economic model?
Helps explain/predict economic behavior in the real world.
What does a production possibilities curve reveal?
What do economic models assume?
factors remain constant
In what way are models helpful to economists?
Help analyze the way the real world works.
What does an economist develop in order to test his or her theory or model?
How does testing models help economists test their hypothesis?
allows economists to see if the model represent reality.
Why is it difficult for economists to apply the result of economic models?
Individual human behavior is not always predictable.
Why do economists disagree over economic theories?
The government shapes how he or she views the world.
What are values?
beliefs or characteristics a person/group considers important.
What can the science of economics not help judge?
Whether a certain policy is good or bad.
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