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Questions and Answers

What is economics?

the study of scarcity and choice

What does scarcity refer to?

limited quantities of resources to meet unlimited wants

What is choice in economics?

the act of selecting or making a decision when faced with two or more possibilities

Define goods.

tangible products that we use to satisfy our wants and needs Signup and view all the answers

What are services?

intangible activities that are performed by other people for money Signup and view all the answers

What is consumption?

the act of buying final goods and services Signup and view all the answers

Who is a consumer?

one who buys goods and services for personal use Signup and view all the answers

What are factors of production?

a resource (such as labor, land, or capital) used to produce a good or service Signup and view all the answers

Define human resources.

the people whose efforts and skills go into the production of goods and services Signup and view all the answers

What is labor productivity?

output per worker per time period Signup and view all the answers

Define technology in economic terms.

a culture's methods and tools for making things Signup and view all the answers

What is meant by standard of living?

the quantity and quality of goods and services available to an individual or society Signup and view all the answers

What are renewable resources?

one capable of being replaced or renewed Signup and view all the answers

Define capital goods.

goods used to produce other goods Signup and view all the answers

What is entrepreneurship?

the process of bringing together the factors of production Signup and view all the answers

Who are entrepreneurs?

a person who gathers together the factors of production to create and operate a business enterprise Signup and view all the answers

What does allocate mean?

to assign parts of a whole Signup and view all the answers

What is marginalism?

the evaluation of the usefulness of adding one more of an item to the production of a good or service Signup and view all the answers

Define opportunity cost.

the amount of goods or services that must be done without in order to obtain another good or service Signup and view all the answers

What is a command economy?

one in which decisions to allocate resources are made by the government Signup and view all the answers

Describe a traditional economic system.

one in which resources are allocated according to tradition and custom Signup and view all the answers

What is a market economy?

one in which the allocation of resources is determined by the free operation of supply and demand Signup and view all the answers

Define microeconomics.

the study of the effects of economic forces on individual parts of the economy Signup and view all the answers

What is macroeconomics?

the study of the forces affecting the economy as a whole Signup and view all the answers

What does Ceteris Paribus mean?

the assumption that all things other than what is being considered will stay the same Signup and view all the answers

What is an economic model?

a simplified representation of an economic problem Signup and view all the answers

Define mediums of exchange.

something readily accepted in payment for goods or services Signup and view all the answers

What is a standard of value?

a way to measure the worth of what is bought and sold Signup and view all the answers

What does store of value mean?

any form of commodity, asset, or money that has value and can be stored and retrieved over time Signup and view all the answers

Define currency.

the part of the money supply consisting of paper money and coins Signup and view all the answers

What is legal tender?

a currency that by law must be accepted in payment of debt Signup and view all the answers

What is fiat money?

all forms of U.S. currency that have value because the government says it does Signup and view all the answers

Define token money.

coins whose metallic value is less than their face value Signup and view all the answers

What are checks?

a written order directing a depository institution to pay a sum of money Signup and view all the answers

What is a trade-off?

the giving up of one thing to obtain something else Signup and view all the answers

What is capital formation?

the production of capital goods Signup and view all the answers

What is a production possibilities curve?

a graph showing the various combinations of goods and services that an economy might produce if all its resources were fully employed Signup and view all the answers

Define luxury.

a nonessential good or service that adds comfort and pleasure to life Signup and view all the answers

What are the four factors of production?

human resources, natural resources, capital resources, and entrepreneurship Signup and view all the answers

How does human resources influence the production of goods and services?

the size of the workforce and labor productivity affect the amount of goods and services produced Signup and view all the answers

What factors affect productivity?

skill of the labor force, quality and quantity of machinery and tools available per worker, and technology Signup and view all the answers

What can be strengthened to improve living standards?

labor, capital, and management Signup and view all the answers

Shortages of natural resources prompt the governments to enact laws that would either limit consumption or require the restocking of renewable resources.

true Signup and view all the answers

Define depreciation.

the decline in value of capital goods Signup and view all the answers

What is barter?

swapping something of value for whatever it was that they wanted Signup and view all the answers

What does "fractional currency" refer to?

coins; called this because the government produces them primarily for the convenience of making change for a dollar Signup and view all the answers

What is an economic system?

the way a society answers the what, how, and who questions Signup and view all the answers

Study Notes

Economics

Study of scarcity and choice, examining how resources are allocated among competing needs.

Scarcity

Represents limited resources available to satisfy unlimited human wants, fundamental concept driving economic decision-making.

Choice

Involves the decision-making process when given multiple alternatives, critical in resource allocation.

Goods

Tangible products utilized to meet consumer needs and desires, ranging from food to clothing.

Services

Intangible actions performed by individuals or businesses for payment, providing value to consumers.

Consumption

The process of purchasing final goods and services, reflecting consumer demand in the economy.

Consumer

An individual who acquires goods and services for personal use, key player in market dynamics.

Factors of Production

Resources necessary for the creation of goods and services, including labor, land, and capital.

Human Resources

The workforce's efforts, skills, and expertise involved in producing goods and services.

Labor Productivity

Measurement of output generated by a worker within a specific time frame, an indicator of efficiency.

Technology

Tools and methods developed by a culture to enhance production processes, impacting overall economic performance.

Standard of Living

Represents the accessibility and quality of goods and services available to individuals or societies.

Renewable Resources

Resources that can regenerate or be replaced sustainably, important for long-term economic stability.

Capital

Goods utilized to produce other goods, representing investments necessary for economic production.

Entrepreneurship

The initiative to combine various factors of production to create new businesses, driving innovation and economic growth.

Entrepreneurs

Individuals who risk capital to start and operate businesses, seeking profit through effective resource management.

Allocate

The process of distributing resources or responsibilities within an economy or organization.

Marginalism

Evaluates the additional benefit of increasing production by one more unit of a good or service.

Opportunity Cost

The cost of forgoing the next best alternative when making a choice, fundamental in economic decision-making.

Command Economy

An economic system where the government centrally makes decisions regarding resource allocation.

Traditional Economic System

Economy based on historical practices and customs, influencing how resources are allocated.

Market Economy

A system where supply and demand conditions dictate resource allocation, underpinning free market principles.

Microeconomics

Focuses on individual economic units and their interactions within the economy.

Macroeconomics

Studies the economy as a whole, analyzing overall trends and large-scale economic factors.

Ceteris Paribus

A principle assuming that all other variables remain constant while evaluating a specific economic change.

Economic Model

Simplified representations of economic scenarios, aiding in understanding complex economic interactions.

Mediums of Exchange

Items that are universally accepted as payment for goods and services, facilitating trade.

Standard of Value

A measure used to gauge the worth of goods and services in an economy.

Store of Value

Asset forms that maintain value over time, enabling storage and retrieval for future use.

Currency

The paper money and coins that serve as official money in an economy, essential for transactions.

Legal Tender

Currency that must be accepted for settling debts, as mandated by law.

Fiat Money

Currency that has value due to government decree rather than intrinsic worth.

Token Money

Coins with a face value greater than their material value, typically used for convenience.

Checks

Written orders initiating payment from a bank account, facilitating transactions without physical currency.

Trade-Off

The act of sacrificing one benefit to pursue another, a significant aspect of economic decision-making.

Capital Formation

The process of producing capital goods, essential for enhancing production capabilities.

Production Possibilities Curve

A graphical representation showing efficient production levels of various goods and services.

Luxury

Nonessential goods or services that enhance comfort and enjoyment, reflecting consumer preferences.

Four Factors of Production

Human resources, natural resources, capital resources, and entrepreneurship are essential for economic production.

Human Resources Influence

Size and productivity of the workforce are critical for increasing the volume of goods and services produced.

Productivity Influencers

Labor skill, machinery availability, and technological advancements determine overall productivity levels.

Improving Living Standards

Enhancing labor, capital, and management quality can significantly elevate living standards.

Resource Shortages Response

Governments may limit consumption or mandate the replenishing of renewable resources to address scarcity.

Depreciation

The reduction in value of capital goods over time, impacting investment and production decisions.

Barter

The direct exchange of goods or services without using money, a foundational trade practice.

Fractional Currency

Coins produced primarily for convenience, aiding in change-making processes.

Economic System

Structure by which a society answers fundamental economic questions regarding resource allocation and production.

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