Questions and Answers
What is a need?
Something essential for survival.
What is a want?
Something that people desire but that is not necessary for survival.
What are goods?
The physical objects that someone produces.
What are services?
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What is scarcity?
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What is economics?
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What is a shortage?
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What is an entrepreneur?
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What are factors of production?
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What is land in economics?
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What is labor?
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What is capital in economics?
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What is physical capital?
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What is human capital?
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What is a trade-off?
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What does 'guns or butter' refer to?
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What is opportunity cost?
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What does 'thinking at the margin' mean?
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What is cost/benefit analysis?
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What is marginal cost?
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What is marginal benefit?
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What is a production possibilities curve?
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What is a production possibilities frontier?
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What does efficiency mean in economics?
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What is underutilization?
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What is the law of increasing costs?
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Study Notes
Basic Economic Concepts
- Need: Essential for survival; includes food, water, shelter.
- Want: Desires beyond necessities; not essential for survival.
- Goods: Tangible items produced for consumption.
- Services: Activities performed by one individual for another, often to fulfill needs or wants.
Scarcity and Choice
- Scarcity: Limited availability of goods and services compared to unlimited wants, necessitating choices.
- Shortage: A condition where demand exceeds supply at a specific price, leading to unfulfilled consumer wants.
Entrepreneurs and Production
- Entrepreneur: Individual who innovatively combines resources to create goods and services.
- Factors of Production: Resources used to produce goods and services, categorized into land, labor, and capital.
Types of Resources
- Land: Natural resources employed in production (e.g., raw materials).
- Labor: Human effort devoted to tasks for compensation.
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Capital: Man-made resources facilitating production; includes two types:
- Physical Capital: Tangible tools and equipment used in the production process.
- Human Capital: Skills and knowledge gained by workers through education and experience.
Decision-Making in Economics
- Trade-off: The sacrifice of one benefit to achieve another, reflecting the opportunity cost of choices made.
- Guns or Butter: Represents the economic trade-off between military and consumer goods production.
- Opportunity Cost: The next best alternative foregone when making a decision.
Marginal Analysis
- Thinking at the Margin: Evaluating the decision to use or produce one additional unit of a resource.
- Cost/Benefit Analysis: A process comparing the sacrifices required and potential gains of a specific action.
- Marginal Cost: The additional cost incurred from producing one more unit.
- Marginal Benefit: The additional benefit gained from producing one more unit.
Production Possibilities
- Production Possibilities Curve (PPC): Graphical representation showing different ways to utilize an economy's resources.
- Production Possibilities Frontier (PPF): The boundary on the PPC illustrating the maximum output achievable.
- Efficiency: Effective resource utilization to maximize output levels of goods and services.
- Underutilization: Utilizing fewer resources than what is possible, leading to lost potential in production.
Economic Growth and Costs
- Law of Increasing Costs: Indicates that shifting production from one good to another requires progressively more resources, reflecting escalating costs associated with diversifying production.
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Description
Explore essential terms in Economics with this set of flashcards from Chapter 1. Each card presents a key concept, including definitions for 'need', 'want', 'goods', 'services', and 'scarcity'. Perfect for reinforcing your understanding of basic economic principles.