Vocab
factors of production
land, labor, capital
(give an example of each)
market in which firms purchase the factors of production from households
factor market
public goods
national parks, snow removal, roads/highways, ...
Factors of production (give a few examples of each). Why do economists believe that all resources are scarce (use your examples to support your answer)?
Labor is not infinite (cannot work infinite hours or have infinite workers).
Land is limited (if you use X amount of land to produce Y, you don't have that land to produce Z).
Resources (water is not always readily available due to pollution, protection, and scarcity).
scarcity
in short supply, not enough to go around
(What kinds of resources to you picture are scarce?)
the rivalry among sellers to attract customers while lowering costs
competition
positive externality
bee keeper benefits from neighbor planting apple trees
walking to work reduces traffic congestion
Compare and contrast centrally planned markets and free markets.
Centrally Planned: government controls market, answers 3 economic questions
Free Market: limited role for government, individuals/households and firms/businesses own factors or production and answer 3 economic questions
free market economy
business and individuals own factors of production and answer 3 economic questions
(What do you picture is the role of the government in a free market economy?)
the market in which households purchase the goods and services that firms produce
product market
negative externality
making furniture by cutting down parts of the Amazon rainforest
a paper manufacturer pollutes a local river to produce paper sold to the community
Explain the role of consumers, business, and government in a free market economy.
Limited Government (only produce what market cannot)
Consumers - purchase products, sell factors of production
Business - buy factors of production, sell products
centrally planned economy
government answers 3 basic economic questions
(What two political philosophies do you picture have a centrally planned government? Can you picture an example?)
the concentration of the productive efforts of individuals and firms on a limited number of activities
specialization
opportunity cost
losing sleep to get up early to go on a ski trip
lower pollution levels given up to purchase a larger vehicle
Function of an economic system
produce and distribute goods and services
mixed / modern economy
(What do you picture is the role of the government?)
a phrase that refers to the trade-off that nations face when choosing whether to produce more or less military or consumer goods
guns or butter
trade-off
choosing to produce broccoli instead of cauliflower
Describe a production possibilities curve
production possibilities frontier - shows maximum production
above - shows production possibilities if resources are increased
below - lower than max efficiency