Economic Basics
what does economics study?
The production, distribution and consumption of a product.
Define scarcity.
Unlimited wants + limited resources.
Name the 4 factors.
Land, Labor, Capital, Entrepreneurs.
What is a PPF?
Graph of production possibilities.
What is a traditional economy?
Based on customs & ancestors.
who are economic agents?
Businesses, consumers, and government
Define opportunity cost.
Value of the next best alternative given up.
Example of land?
Natural resources like water or timber.
What does on-curve mean?
Efficient production.
What is a command economy?
Gov't controls resources & production.
Goods are tangible items; services are actions performed.
Example of opportunity cost?
Choosing to study means giving up time with friends.
Example of labor?
Human effort — physical or intellectual.
Inside the curve?
Idle resources.
What is a market economy?
Individuals decide; little gov't control.
What is the difference between micro and macro
micro = individual
macro = global
What forces choices?
Scarcity
Example of capital?
Machines, tools, factories.
Outside the curve?
Economic growth or impossible.
What is a mixed economy?
Blend of gov't and market choices.
Who is Adam Smith
Father of capitalism, invisible hand
Define trade-offs.
All alternatives given up when a choice is made.
What do entrepreneurs do?
Combine resources and take risks.
Define per-unit opportunity cost.
Opportunity cost ÷ units gained.
Example of command system?
Soviet Union industrialization.