Describe the nature of human wants and how they are satisfied.
Human wants are unlimited. Human wants can be satisfied through production of goods and services
Identify the four factors of production.
land, capital, labor & Entrepreneurship
land
ny natural resource provided by nature and used in the production process
capital
Previously manufactured goods used to make other goods and services
labor
Human effort directed toward producing goods and services.
entrepreneurship
An individual who starts new businesses, introduces new products, and improves management techniques.
Explain the key ideas in the economic way of thinking.
Scarcity forces people to choose.
People examine costs/benefits in making economic choices
People try to make informed decisions
People respond to incentives.
People gain when they trade voluntarily.
Choices are future-oriented
People's choices are influe
Describe the choices businesses face
Every choice involves benefits and costs
Describe a major goal of business.
Increase the level of activity as long as benefit exceeds costs
Identify factors that drive economic decisions
incentives, benefits, costs, trade-offs, consequences
List the two branches of economics
macroeconomics and microeconomics
Describe macroeconomics
large
The performance, structure, and behavior of a national or regional economy as a whole.
Growth, inflation, unemployment.
Describe microeconomics
small
Studies how households and firms and some states make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold.
Price for goods, wages, market failure
Explain what the pillars of free enterprise are
Private Property
Specialization
Voluntary Exchange
The Price System
Market Competition
Entrepreneurship
Why are they the pillars of free enterprise
They are essential to the operation and success of the U.S. economic system.
Describe the nature of command economic system
Central authority decides what goods and service will be produced and how they will be priced
Describe the nature of traditional economic systems
Traditional and custom determine which goods and service are produced
Production is generally on the substance level
Describe the nature of mixed economic systems
Almost all economic systems are mixed: elements of all three systems.
Describe how the Circular Flow model explains the function of a free market economy.
Circular Flow of $, products, and resources
Represents economic activity that happens every day.
Outside (counterclockwise) arrows show the flow of Goods and Resources.
Inside (clockwise) arrows show the flow of money.
Answers WHFW
Define money
anything that is generally accepted as payment for goods and services
Explain moneys 3 functions
Medium of Exchange
Store of Value
Measure of Value
Identify the goals of the US economic system
Full Employment
Economic Growth
Price Stability
Economic Freedom
Economic Security
Economic Equity
Efficiency
Explain the role prices play in a market economy
influence the for Whom question of economics.
Describe how demand illustrates the price effect.
price increases demand decreases; price decreases demand increases
Explain why people buy more at lower prices and less at higher prices.
more people can afford it
Describe the relationship between individuals' demands and market demand.
individual persons demand and market is the total of all individual demands in a given market at a particular time.
Define the price elasticity of demand and explain what determines it.
measure of the impact of the price effect. When there is a big response by consumers to change in price, it is said to be elastic. When the there is a small response by consumers to change in price, it is said to be inelastic
Describe the difference between the price effect and a change in demand
price effect is the impact price has on demand and a change in demand is how much of a product the economy wants
Describe how supply is related to opportunity cost.
Just as you have opportunity costs with your time, so do suppliers/producers have opportunity cost with what and how much they produce.
Explain the price effect related to supply
DIRECT relationship between price and quantity supplied. Price goes up supply goes up. Price goes down supply goes down
Explain why producers want to sell more of something at higher prices and less at lower prices
to make more money
Describe the relationship between market supply and the supplies of individual sellers
Market supply is the he total of all individual suppliers' products in a market at a particular time
Explain the price elasticity of supply and what determines it.
If a change in price causes a large change in the amount supplied, the price effect is significant and supply is elastic. a businesses ability to respond quickly a price change
Describe the difference between the price effect and a change in supply.
price effect is the impact price has on suppy and a change in supply is how much of a product the businesses produce
Describe how markets "clear" the amount buyers want to purchase with the amount sellers want to sell.
The price at which the amount supplied is equal to the amount demanded.
Explain the nature of shortages and surpluses and how market competition eliminates them.
Shortage Occurs when the quantity demanded of a good is greater than the quantity supplied. Businesses/suppliers raise the selling price to decrease consumer demand. Surplus Occurs when the quantity supplied of a good is greater than the quantity demanded
Explain the rationing function of prices
Prices ration - allocate or distribute a product by a price system. Product is rationed to the person willing and able to pay the market-clearing price.
Explain how market-clearing prices motivate people to produce goods and services.
when demand is up, prices rise and more is produced
Describe the kinds of changes that occur in demand and supply, and how these changes affect market-clearing prices.
If a surplus occurs, price and quantity of output fall. If a shortage happens, price and quantity of output rises.
Identify the two main sources of household income
wage and salary
Describe the factors that influence wealth accumulation
Income
Expectations
Current interest rates
Taxes
Explain how personal budgets help people make good choices as consumers and savers
summarizes an individual's planned income and spending over a specific time period
Identify what an individual should consider in making saving and investing decisions
safety, rate of return and liquidity