Glencoe Economics Principles Overview

Fundamental Economic Concepts

• Scarcity refers to the limited resources available to meet all human wants.
• Key factors in addressing scarcity include determining WHAT to produce, HOW to produce, and FOR WHOM to produce.
• Needs are essential for survival, while wants are non-essential desires.

Economic Principles

• TINSTAAFL: emphasizes that everything has a cost; nothing is free.
• Factors of production include land, capital, labor, and entrepreneurship, all vital for creating goods and services.

Goods and Services

• Capital goods are the machinery, tools, and buildings used in production.
• Labor is the human effort applied in the production of goods and services.
• Entrepreneurs are individuals who initiate new businesses and drive economic change.

Measuring Economic Performance

• Gross Domestic Product (GDP) measures the total dollar value of all final goods and services produced within a nation over one year.
• Goods are tangible items that serve a purpose, while consumer goods are intended for final individual use.
• Durable goods last for 2-3 years, whereas nondurable goods last less than 2 years.
• Services encompass activities performed for others, like repairs and personal grooming.

Economic Value and Wealth

• Consumers are individuals who purchase goods and services.
• Value is the worth of a product based on its usefulness.
• The paradox of value illustrates the discrepancy between the low value of essentials (like water) and the high value of nonessentials (like diamonds).
• Utility is a measure of the usefulness of a product in providing satisfaction.
• Wealth is defined as the accumulation of valuable and transferable goods.

Market Dynamics

• A market is any mechanism that enables buyers and sellers to exchange products.
• Factor markets involve the buying and selling of production inputs.
• Product markets are where final goods and services are sold to consumers.

Economic Growth and Efficiency

• Economic growth occurs when the output of goods and services increases over time.
• Productivity measures the efficiency of production, indicating how much is produced.
• Human capital comprises the skills, knowledge, and health of individuals contributing to labor.

Organizational Structures

• Division of labor organizes work by assigning specific tasks to individual workers.
• Specialization occurs when workers focus on tasks where they hold a comparative advantage.

Interdependence and Decision-Making

• Economic interdependence describes the mutual reliance among people for the production and consumption of goods.
• Trade-offs represent the alternatives sacrificed when making a choice.
• Opportunity cost reflects the value of the next best alternative forfeited.

Economic Models and Assessments

• Production possibilities frontier illustrates the maximum combinations of goods and services an economy can produce using all resources efficiently.
• Economic models are analytical tools like graphs and equations demonstrating how aspects of the economy function.
• Cost-benefit analysis is a method of comparing the costs associated with an action to the anticipated benefits.

Economic Systems

• A free enterprise system is characterized by private sector decision-making regarding production and distribution, free from extensive government intervention.
• The standard of living measures quality of life based on access to necessities and luxuries.
• An economic system is an organized approach to meeting the population's wants and needs.
• Traditional economies rely on established customs and practices for resource allocation.
• Command economies depend on centralized authority for decision-making about production and distribution.