Basic Economics
What is economics?
The study of how to meet unlimited wants with limited resources.
What are the four types of resources?
Natural/Land
Human/Labor
Capital
Entrepreneurship
What are the four types of economic systems?
Command, Market, Traditional, and Mixed
What is capitalism?
Philosophy characterized by marketplace competition and private ownership of business. Government concerned about welfare of its citizens/helps those who cannot help themselves - but generally hands off and lets competition/consumers drive economy.
What does the unemployment rate measure?
The amount of working aged adults who do not currently hold employment/a job.
What is the difference between economic wants and non-economic wants?
Economic Wants are a desire for something that money can acquire (shelter, car, etc.), and non-economic wants is a desire for things that cannot be bought. (affection, peace, etc.)
Define labor resources:
Refers to all of the people in a society who work.
What are the three basic economic questions every system must answer?
What?
How?
For Whom?
What is communism?
No private ownership allowed, government owns and controls all resources and little to no economic freedom for citizens.
What is inflation?
The rising costs reflected in an economy. Typically manifests in living costs (rent, groceries, gas, etc.)
What are resources?
All things used in producing goods and services.
What is the difference between natural resources and capital resources?
Natural = Resources found in nature (air, water, wood, oil, etc.)
Capital = Manufactured or constructed resources (machinery, infrastructure, money, etc.)
How does a traditional economy decide what to produce?
Habits, Traditions, Rituals/Religions
What is socialism?
Classless society approach, higher taxes, values equality for all, sharing resources, etc.
What does GDP stand for? What does it measure?
Gross Domestic Product - measures output of all goods and services from labor/resources in a country/economy.
What is scarcity?
The difference between unlimited wants and limited resources.
What is entrepreneurship? Why is it important to society?
Entrepreneurship: Skills of people willing to invest their time and money into running a business.
Important because if no one is willing to take these risks, our economy would be affected by lack of business!
Compare a command economy to a market economy
Command: Government makes economic decisions for the people - resources controlled by government
Market: Government plays no role in economic decisions - individuals and companies own the resources
Capitalism - individual ownership and competition drive economy
Communism - Government ownership and little to no economic freedom
What are the five stages of the business cycle?
Specialization/Training
Division of Labor
Motivation
Quality Work Life
Increase in Tools/Technology
Explain two limitations for one of the resources - human, capital, or natural
Answers may vary.
Human: Training, amount of people who can work
Capital: Cost, technology, resources available
Natural: Expense, boundaries, amount, conditions
Why is the US considered a mixed economy?
Because our economics are generally not controlled by the government, but there are some regulations set in place to help the economy do well.
(social programs, minimum wage, labor laws, FDA, etc.)
How do the political philosophies communism and capitalism match up with the economic systems?
Communism = Command Economy
Capitalism = Market/Mixed