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 that buys a good or service
Factors of Production
Productive resources that make up the four categories of land, capital, labor, and entrepreneurship
Sum of people's 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.
• Scarcity is not enough to create value. It also has to have utility. Such necessities as water have little monetary value whereas non-essentials as wants have a higher monetary value.
• What are durable and nondurable goods?
• Durable goods are goods that can last three years or more and are not meant for one time use, whereas nondurable goods are things you would find on the shelves such as perishables.
• 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. So as productivity grows, there is economic growth.
• What is a popular model economists use to illustrate the concept of opportunity costs?
• The 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 seemingly infinite wants
• Why is economics considered a social science?
• It is a social science because it seeks to explain how society deals with the scarcity problem. It applies the scientific method to study human behavior.
• 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.
• Product markets are where producers sell their goods and services to consumers and the factor markets are the markets where productive resources are bought and sold.
• What is incremental decision making?
• Make small steps toward a final goal whenever the exact cost involved is unknown. 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?
• In order for something to have value it must have it must have utility (the capacity to be useful and provide satisfaction.