chapter one : fundamentals of economics

Question 1

needs are…

Answer 1

• neccessities for you to live a healthy and safe life
• housing, transportation, food, etc.

Question 2

wants are…

Answer 2

• comforts and upgrades you can live without
• travel, entertainment, luxury clothing/jewlery, eating out

Question 3

goods are…

Answer 3

items you buy, such as food, clothing, toys, etc.

Question 4

services are…

Answer 4

jobs people do for other people such as haircuts, teaching, etc.

Question 5

scarcity

Answer 5

• implies limited quantities of resources to meet unlimited wants
• it always exists bc our needs and wants are always greater than our resource supply

Question 6

shortage

Answer 6

occurs when producers will not or can not offer goods or services at their current prices

Question 7

factors of production

Answer 7

• the resources used to create goods and services; land, labor, capital, entrepreneurship

Question 8

land

Answer 8

natural resources/ where goods or service will be produced

Question 9

labor

Answer 9

who puts in the effort of making the goods or service

Question 10

capital

Answer 10

the tools used to make the goods or services

Question 11

entrepreneurship

Answer 11

combine the factors to make a profit

Question 12

physical capital

Answer 12

tangible assets or non-human resources, such as equipment and property

Question 13

human capital

Answer 13

intangible assets or human resources, such as human. expertise, experience, knowledge, and. capabilities

Question 14

entrepreneurs

Answer 14

an individual who createsa new business, bearing most of the risk and enjoying most of the rewards

Question 15

benefits of using capital - list

Answer 15

• extra time
• more knowledge
• increased productivity

Question 16

trade-offs

Answer 16

• refers to a situation in which gaining one benefit requires sacrificing another
• arise in decision-making

Question 17

“guns or butter”

Answer 17

the decision of a govt. to produce military goods or consumer goods

Question 18

opportunity cost

Answer 18

the cost of giving up one opportunity in order to take another one (the ‘next best alternative’)
- ex. go to out of state college or stay close to home

Question 19

decision making grid

Answer 19

ex: sleep late or wake up early to study
- benefits, benefits foregone, opportunity cost

Question 20

thinking at the margin

Answer 20

• to think about your next step forward
• in addition to looking at opportunity costs, economic also look at the cost and benefits or adding or subtracting one more unit
• it means additional
• as long as the marginal benefit is greater than the marginal cost, it pays to add one more unit

Question 21

cost/benefit analysis

Answer 21

a systematic process for identifying, quantifying, and comparing expected benefits and costs of an investment, action, or policy

• 2 main applications;
  1. determining the soundness of a decision
  2. providing a basis for comparing alternative decisions

Question 22

production possibilities

Answer 22

• production possibility curve
• inside the curve: under utilization or resources
• outside the curve: not attainable w/ available resources
• on the curve: full utilization
• shape of a PPC: downward sloping curve

Question 23

efficiency

Answer 23

when all goods and factors of production in an economy are distributed or allocated to their most valuable uses and waste is eliminated or minimized

Question 24

growth

Answer 24

getting the most out of your resources