Chapter 1

Question 1

Scarcity

Answer 1

the condition that results from society not having enough resources to produce all the things people would like to have

Question 2

Economics

Answer 2

the study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources

Question 3

need

Answer 3

basic requirement for survival (food, clothing, shelter, etc.)

Question 4

want

Answer 4

a way of expressing a need (need = food, want = pizza)

Question 5

WHAT to Produce

Answer 5

a society can’t have everything its people want

Question 6

HOW to Produce

Answer 6

• more equipment/fewer workers

- less equipment/more workers

Question 7

FOR WHOM to Produce

Answer 7

workers, professional people, or gov’t employees

Question 8

Factors of Production

Answer 8

resources required to produce things we would like to have

Question 9

Land

Answer 9

natural resources not created by humans

Question 10

Capital

Answer 10

the tools, equipment, machinery, and factories used in the production of goods and services

Question 11

Financial Capital

Answer 11

money used to buy the tools and equipment used in production

Question 12

Labor

Answer 12

people with all their efforts, abilities, and skills

Question 13

Entrepreneurs

Answer 13

a risk taker in search of profits who does something new with existing resources

Question 14

Production

Answer 14

process of creating goods and services

Question 15

Gross Domestic Product (GDP)

Answer 15

the dollar value of all final goods and services

Question 16

Economic Products

Answer 16

goods and services that are useful, relatively scarce, and transferable to others

Question 17

good

Answer 17

an item that is economically useful or satisfies an economic want

Question 18

consumer good

Answer 18

final use by individuals

Question 19

capital goods

Answer 19

manufactured goods that are used to produce other goods and services

Question 20

service

Answer 20

work that is performed for someone

Question 21

consumer

Answer 21

person who uses goods and services to satisfy wants and needs

Question 22

paradox of value

Answer 22

the situation where some necessities have little monetary value, whereas some non-necessities have a much higher value

Question 23

Utility

Answer 23

the capacity to be useful and provide satisfaction

Question 24

Wealth

Answer 24

the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another

Question 25

factor markets

Answer 25

markets where productive resources are bought and sold

Question 26

product markets

Answer 26

markets where producers sell their goods and services to consumers

Question 27

economic growth

Answer 27

occurs when a nation’s total output of goods and services increases over time

Question 28

productivity

Answer 28

amount of output produced by a given amount of inputs, in a specific period of time

Question 29

division of labor

Answer 29

work is arranged so that individual workers do fewer tasks than before

Question 30

specialization

Answer 30

factors of production perform tasks that they can do relatively more efficiently than others

Question 31

human capital

Answer 31

the sum of the skills, abilities, health, and motivation of people

Question 32

economic independence

Answer 32

we rely on others, and others rely on us, to provide the goods and services that we consume

Question 33

trade offs

Answer 33

alternative choices whenever they make an economic decision

Question 34

opportunity cost (2)

Answer 34

• the cost of the best alternative use of money, time, and resources when one choice is made rather than another
• represented by trade offs

Question 35

Production Possibilities Frontier

Answer 35

a diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed

Question 36

all of the point on the curve

Answer 36

maximum of combinations of output possible

Question 37

points outside the curve

Answer 37

impossible

Question 38

the cost of idle resources

Answer 38

a country can’t reach its full production potential

Question 39

cost benefit analysis

Answer 39

a way of thinking about a problem that compares the costs of an action to the benefits

Question 40

free enterprise economy

Answer 40

consumers and privately owned businesses, rather than the government, make the majority of the WHAT, HOW, and FOR WHOM decisions

Question 41

standard of living

Answer 41

the quality of life based on the possession of the necessities and luxuries that make life easier