Unit 1A
Lisa was showing her friend Joe the new car she had purchased. She told Joe that because she bought the car she had to give up a trip to the Bahamas. Lisa’s opportunity cost was
Trees and water are an example of which factor of production?
Land - natural resources
What are the three sectors of the circular flow of income?
Households
Businesses
Government
Demand decreases
Provide one example of the role of government in the economy
-Provide a legal system
-Provide public goods
-Correct market failures (externalities)
-Maintain competition/regulate monopolies
-Redistribute income
-Stabilize the economy (reduce unemployment)
Economics is the study of
A- Money
B- Capital
C- How individuals, government and businesses choose to use limited resources
C- How individuals, government and businesses choose to use limited resources
What are the three economic questions of society?
What to produce?
Who to produce?
Who gets it?
What does interdependence mean?
For example, in the Circular Flow of Income, households, businesses & government are interdependent with eachother.
They rely on each other or they depend on each other to function
Law of Supply: When price increases what happens to supply
Supply increases
Who supplies labor? Who demands labor? - extra 50 points for both
Individuals supply labor and businesses demand labor
People must make choices because of __________.
There is not enough goods/services to satisfy everyone's wants & needs.
Scarcity
An economic system based on past ways of life and culture
Traditional system
What is exchanged between the government and households/businesses in the Circular Flow of Income?
Households/businesses pay taxes and the government provides public goods and services in return
Which direction do demand curves go? Which direction do supply curves go?
Demand curves go downward.
Supply curves go upward.
Price floors protect producers or suppliers/sellers.
Price ceilings protect consumers or buyers.
Mr. Cerchio has a percentage taken out of each paycheck to save for his retirement. He is 63 years old and planning to retire when he is 65 years old. This is an example of what kind of goal?
Medium Term Goal: 1 to 4 years to accomplish
An economic system in which the government controls the production & distribution of goods and services
-Communism
The government reduces taxes on personal income. This increases household income. What is likely to happen next?
Households will spend more at businesses and receive more private goods/service in return
Define equilibrium price
The price at which supply and demand are equal. The point where the supply and demand curves intersect
What is the difference between private and public goods?
Private goods are purchases by individuals and owned privately. Public goods are paid for by taxes and we share them
-Good grades
-Graduate high school
-Move to the next grade
-Make your family and self proud
An economic system in which individuals control production & distribution of goods and services is
Market System
-Capitalism
What do banks do with the savings that households provide to them?
Banks offer investments to businesses or loans to households
What are substitute goods? Provide an example.
Goods that can be used in place of each other
What is an externality?
A situation when somebody other than the buyer or the seller is effected by the sale