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What is the basic economic problem that all societies face?
(Scarcity)
What is the difference between a good and a service?
(Goods are tangible; services are intangible)
Who is considered the father of economics?
(Adam Smith)
What are the three basic economic questions?
(WHAT, HOW, FOR WHOM to produce)
What two factors determine value in economics?
(Scarcity and utility)
Name one way people might cope with scarcity when a storm disrupts deliveries.
(Rationing, sharing, prioritizing needs, etc.)
Give an example of a durable good and a nondurable good.
(Durable: car; Nondurable: bread)
What was the title of Adam Smith’s famous 1776 book?
(The Wealth of Nations)
Give an example of a "HOW to produce" decision
(Automation vs. manual labor)
What is the paradox of value?
(Essential items like water are cheap; luxuries like diamonds are expensive)
Why can’t scarcity be completely eliminated?
(Unlimited wants vs. limited resources)
What type of good is a tractor used by a farmer?
(Capital good)
What did Smith mean by the "invisible hand"?
(Market self-regulation via self-interest)
How does a younger population influence production methods?
(More labor-intensive)
Why does water have less monetary value than diamonds?
(Water is abundant; diamonds are scarce)
What does TINSTAAFL stand for?
(There Is No Such Thing As A Free Lunch)
Why are services not counted as part of a nation’s wealth?
(They are intangible)
Why did Smith criticize monopolies?
(They distort free markets and limit choice)
Why might a society choose to produce military goods over housing?
(Prioritizing security)
Define wealth in economic terms.
(Accumulation of tangible, scarce, useful, transferable goods)
How does scarcity influence the three basic economic questions?
(Forces societies to choose WHAT/HOW/FOR WHOM to produce)
Explain the difference between a "need" and a "want."
(Need: survival; Want: desire)
How might Smith view modern multinational corporations?
(Mixed: pro-trade but anti-monopoly)
How do consumer decisions answer "WHAT to produce" in the U.S.?
(Demand drives production)
How does utility differ from person to person?
(Subjective satisfaction; e.g., a concert vs. a book)