Questions and Answers
What are capital goods?
What is wealth?
An abundance of valuable possessions or money.
What does economics study?
The production, consumption, and transfer of wealth.
What is meant by value?
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What does utility refer to in economics?
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What is opportunity cost?
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What does trade-off mean?
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What is standard of living?
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What is consumer sovereignty?
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What are consumer goods?
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What is profit?
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What is the profit motive?
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What is inflation?
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What is free enterprise?
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What does the circular flow model describe?
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Study Notes
Key Economic Concepts
- Capital Goods: Manufactured means of production essential for creating other goods; includes factories, machinery, tools, and buildings.
- Wealth: Represents an abundance of valuable possessions or money, indicating material prosperity.
- Economics: Study of production, consumption, and transfer of wealth, analyzing a region's material prosperity.
Value and Utility
- Value: Monetary worth assigned to something, e.g., an estate valued at $45,000.
- Utility: Satisfaction derived from consuming a good or service; reflects the usefulness of products.
Cost and Choices
- Opportunity Cost: The cost of a chosen action expressed in terms of the value of the next best alternative forgone; crucial for resource allocation efficiency.
- Trade-off: The act of exchanging one benefit for another, often involving a decision where one option is relinquished for a perceived greater benefit.
Living Standards and Consumer Power
- Standard of Living: Level of material comfort based on available goods, services, and luxuries, reflecting the welfare of individuals or communities.
- Consumer Sovereignty: Concept that consumers dictate the types of goods produced, emphasizing the role of consumer choice in the economy.
Types of Goods and Profit
- Consumer Goods: Products purchased and used by customers for personal use, distinguishing them from goods used in production.
- Profit: Return received on business operations after all expenses; indicates the financial success and growth rate of an enterprise.
Economic Motivation and Regulation
- Profit Motive: The desire to earn monetary gain drives business activities; significant for determining expense deductibility in transactions.
- Inflation: Increase in general price levels over time, reducing the purchasing power of currency and affecting economic stability.
Market Dynamics
- Free Enterprise: Economic system where private businesses operate with minimal government intervention, promoting competition and profit.
- Circular Flow of Activity: Model illustrating the continuous movement of income between producers and consumers, highlighting economic interdependence.
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Description
Test your knowledge on key economic concepts in Chapter 1 and 2, focusing on definitions like capital goods. These flashcards cover essential terms and their implications in production and consumption. Perfect for students looking to reinforce their understanding of economics.
