Basic Economics
What is economics?
This term refers to the social science that studies how people, businesses, and governments make choices to allocate limited resources to satisfy unlimited wants and needs.
What four economic systems do you know?
Traditional ES, Market ES, Command ES, Mixed ES
What is considered a "natural resource"? (examples)
Trees, water, minerals, and even wilderness areas.
What is a barter system?
Barter involved exchanging one type of good or service for another.
What is the economy?
This word describes a geographic area involved in production, distribution, and consumption.
What is a traditional economic system?
This oldest economic system uses traditions, inheritance, and barter instead of money.
What is labor?
Human effort used to produce goods and services.
What is money?
Money is a medium of exchange that facilitates transactions of goods and services. It also acts as a store of value, allowing individuals to save purchasing power for future use.
What is scarcity?
This core concept explains why we cannot “have it all” due to limited resources.
What is a market economy?
This system relies on supply and demand, private property, and minimal government intervention.
What is capital?
Tools, machinery, software, buildings, and equipment.
What is commodity money? (examples)
Shells, beads, or salt were examples of this type of money with intrinsic value.
What is opportunity cost?
This is the value of the next-best alternative you give up when making a decision.
What is a command economy?
In this system, a centralized body (usually the government) decides prices, outputs, and jobs.
What is financial capital?
Financial capital is any economic resource measured in terms of money that is used to buy what is needed to produce goods or services.
What services do banks provide?
e.g. lending, deposit-taking, and money transfer
What are the three fundamental economic questions?
1. What should be produced? 2. How should it be produced? 3. For whom should it be produced?
What is the invisible hand?
This metaphor describes how self-interest in a free market unintentionally benefits society.
What is a perfect competition?
Perfect competition in the factor market refers to a high level of competition that pushes the supply and demand for each factor to an efficient equilibrium.
What are digital currencies?
Bitcoin and other cryptocurrencies and operate independently of central banks and are based on decentralized blockchain technology.