Scarcity and Choices
Resources that are limited while humans wants are unlimited
What is Scarcity?
What are the three economic questions every economy must answer?
1) What to produce
2) How to produce?
3) For whom to produce
What is one major characteristic of capitalism?
1) Private property
2) Economic Freedom
3) Competition
4) Profit Motive
5) Entrepreneurship
Name the five major groups involved in a free enterprise economy
1) consumers
2) businesses
3) workers
4) entrepreneurs
5) Government
What does GDP measure
GDP = How much an economy produces
A student chooses to work after school instead of hanging out with their friends
What is the opportunity cost?
Hanging out with friends
Everything you give up when making a choice
What is a trade-off?
Which economic system relies on customs and traditions to make economic choices?
Traditional Economy
What is profit motive?
The desire to earn profit
what do consumers do in a free enterprise system?
purchase goods and services, make economic decisions, influence businesses, and create demand
What is unemployment?
The % of people in the labor force who are actively seeking work but do not have a job
The government tells every business exactly what to produce and how much to charge
What type of economy is this?
Command
The next-best alternative given up when making a choice
What is opportunity cost?
Which economic system has the government making all major economic decisions?
Command Economy
Name 3 characteristics of American Free Enterprise
1) Private Property
2) Economic Freedom
3) Voluntary Exchange
4) Competition
5) Profit Motive
6) Entrepreneurship
what does an entrepreneur do?
starts businesses, takes risks, creates products, organizes resources, and seeks opportunities
What is inflation?
A general increase in the prices of goods and services over time
GDP growth: +4%
Unemployment: 4%
Inflation: 2%
Increasing productivity
Increasing standard of living
Would you describe this economy as performing well and why?
yes, multiple indicators suggest
You have $20, you can either buy a video game or go out to dinner. You choose the video game.
What is the opportunity cost if DINNER was your next best alternative?
Going out to dinner
Which economic system relies primarily on consumers and businesses making the economic decisions?
A market economy
A new restaurant opens across the street from an existing restaurant and charges lower prices
What economic concept is being demonstrated?
Competition
name two responsibilities of businesses
1) provide safe products
2) follow laws/regulations
3) treat workers fairly
4) be honest with consumers
The amount of goods and services produced per unit of input
What is productivity?
A country has a large GDP, but income is very unevenly distributed and many people have poor access to healthcare.
Does GDP alone prove that everyone in the country is doing well? Explain
No, GDP does not measure everything about people's quality of life and/or standard of living
Why does scarcity force people to make choices?
Because resources are limited, people cannot have everything they want, so they must decide how to use their resources.
Why is the United States considered a mixed economy?
Both individuals/businesses and the government make economic decisions
How can competition benefit consumers?
It can encourage lower prices, better products, innovation, and better customer service
Does free enterprise mean "no government?" explain
no, government still protects property, enforces laws, protects laws, protects consumers, maintains fair competition, and performs other responsibilities
name two things than can increase productivity?
1) better tech.
2) better training
3) better equipment
4) education
5) improved organization
Explain why every economics system involves trade-offs
resources are scarce, so choosing one option means giving up another option. Every economic system must decide how to allocate limited resources.