ECON 208 Chapter 1 vocab

Society's resources are often divided into broad categories. They are:
- _____ (natural endowments)
- _____ (mental and physical efforts)
- ____ ( tools, machinery, equipment)
Click the card to flip 👆
1 / 36
Terms in this set (36)
Society's resources are often divided into broad categories. They are:
- _____ (natural endowments)
- _____ (mental and physical efforts)
- ____ ( tools, machinery, equipment)
land, labour, and capital
How does economists call these 3 broad categories of resources?
factors of production
Factors of production are used to produce _____ and _____
goods, services
_____ are tangible ( ex: cars, steel)
goods
______ are intangible (ex: legal advice)
services
_____ is the act of making them
production
_____ is the act of using them
consumption
Economics def
the study of the use of scarce resources to satisfy "unlimited "human wants
The concept of scarcity in economics usually refers to a condition
where people's wants can never be satisfied by the available resources.
There are enough resources to produce only a ____ of the goods and services that we want.
fraction
Because resources are scarce, individuals are required to make _____ (among alternatives)
choices
Scarcity arises from limited resources. For this reason, all economic choices involvecost (and opportunity cost)A point lying inside the production possibilities boundary shows ainefficient use of resourcesIf a country's production possibilities boundary is drawn as a straight (downward-sloping) line it indicatesconstant opportunity cost (of producing more of either good)On a diagram of a production possibilities boundary, the concept of scarcity is illustrated by theunattainable points (outside the boundary)On a diagram of a production possibilities boundary, the concept of opportunity cost is illustrated by thenegative slope of the production possibilities boundaryOn a diagram of a production possibilities boundary, the concept of choice is illustrated by theneed to choose among the alternative attainable points on the PPBAn insight first fully developed by Adam Smith is thatself-interest, not benevolence, is the foundation of economic orderThe famous economist who first described the division of labour wasAdam SmithSpecialization of labour led to greater efficiency in the allocation of resources because ofthe principle of comparative advantageAn economic system that relies primarily upon tradition, custom and habit in economic decision making is a _____ _____. It is a static system, where people follow their parent's occupation.traditional systemIn practice, the term "centrally planned economy" refers to an economy in whichthe mix of market and command principles is heavily weighted towards the latterBehaviour in free-market economies is mostly directed byself interestIn command economies, economic behaviour is largely determined by acentral authorityIn mixed economies, economic behaviour is affected byelements of tradition, government command, and market incentivesIn traditional economies, economic behaviour isbased primarily on custom and habitComplex economic plans for many economic sectors are most associated with acommand economyMost modern economies in the world today are _____ _____, they have a mix of traditional, command and market elements. The degree of the mix varies from sector to sectormixed economiesGovernment in the Modern Mixed Economy: - provides ____ in market economies that _____ property rights and enforce of contracts - Intervene to: --> correct market failures --> provide public goods --> offset the effects of externalities --> Income redistributionInstitutions, protectWhat does institutions in Market economies protect?property rights and enforcement of contractsWhen does the government intervene? to: --> correct _____ _____ --> provide ____ ____ --> offset the effects of _____ --> _____ redistributionmarket failures, public goods, externalities, IncomeEconomy defa system in which scarce resources (land, labour, and capital) are allocated among competing uses.Key questions in economy: - ____ goods and services to produce? (Resource allocation) - ____ to produce them? - _____ gets to consume them? (Distribution of consumption) - Economics studies the what, how and for whom. ______ and _____ are key activities in an economyWhat, how, who, Consumption, productionPlanned economy: - the _____ controls the resources - Economic activities are conducted according to plans by the ____ - Plans can coexist with ____, although the markets are heavily controlled (ex: prices) - Main problems of a planned economy: 1)_____ 2)_____ - Another phenomenon is chronic shortagegovernment, government, markets, Information, IncentivesMarket economy: - _____ ownership of resources is predominant - Economic decisions are made in a _____ manner - Prices and quantities are determined by supply and demand on the _____ - Mixed with ____ interventionsPrivate, decentralized, markets, governmentOpportunity cost defthe value of the next best alternative that is forgone when one alternative is chosenProduction possibilities frontier defnegatively sloped boundary that shows the attainable combinations when resources are used efficiently