Econ. Ch. 1
Terms in this set (25)
tool, equipment, or other manufactured good used to produce other goods and services; a factor of production
good intended for final use by consumers rather than businesses
a person who uses goods and services to satisfy wants and needs
productive resources that make up the four categories of land, capital, labor, and entrepreneurship
factors of production
sum of peoples' skills, abilities, health, and motivation
cost of the next best alternative use of money, time, or resources when one choice is made rather than another
fundamental economic problem facing all societies that results from a combination of scarce resources and people's virtually unlimited wants
work or labor performed for someone; economic product that includes haircuts, home repairs, forms of entertainment
ability or capacity of a good or service to be useful and give satisfaction to someone
worth of a good or service as determined by the market
What are the three basic economic questions every society must answer?
What must we produce? How should we produce it? For whom should we produce?
What are the four key elements of economics?
Description, Analysis, Explanation, Prediction
Give an example of the paradox of value.
For example, water was so plentiful in many areas that it had little or no value. On the other hand, diamonds were so scarce that they had great value. The problem was that scarcity by itself is not enough to create value.
What are durable and nondurable goods?
A durable good is any good that lasts three years or more when used on a regular basis. A nondurable good is an item that lasts for less than three years when used on a regular basis.
What is the relationship between scarcity, value, utility, and wealth?
In order for something to have value, it must have scarcity and utility and wealth is the accumulation of valuable products.
Why is productivity important to economic growth?
Economic growth occurs when a nation's total output of goods and services increases over time and productivity is the measure of the amounts of inputs and outputs.
What is a popular model economists use to illustrate the concept of opportunity costs?
Decision making grid
What is an alternative choice called?
What is the difference between trade-offs and opportunity costs?
A trade-off is an alternative choice where opportunity cost is the cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
What is the cause of scarcity?
Limited resources and infinite wants
Why is economics considered a social science?
Economics is considered to be a social science because it seeks to explain how society deals with the scarcity problem. It applies this scientific method to study human behavior and potential.
What is the relationship between goods, services, and consumers?
The consumer is a person who uses goods and services to satisfy wants and needs.
Explain the difference between product market and factor market.
A product market is a market where goods and services are offered for sale. A factor market is a market where productive resources are bought and sold.
What is incremental decision making?
Making small steps when decision making by taking small, incremental steps toward the final goal. This way if the cost is larger than expected, the decision can be reversed without too much lost.
How is a product's utility related to its value?
For something to have value, it must also have utility, or the capacity to be useful and provide satisfaction.