Modules 1 and 2 - Online Economics Class
2022 - Final Exam Study Guide
economics
the study of how people choose to spend their scarce resources as an attempt to satisfy
unlimited wants
production possibilities curve (ppc)
a graph used to illustrate economic decisions about what/how much to produce
scarcity
when there's not enough resource to produce all goods/services that people want at a
zero price
trade-offs
when you give up something to do something else; result of scarcity
opportunity cost
the most desirable alternative given up as the result of a decision; result of a trade-off
benefit-cost analysis
economic model that compares the costs and benefits of a decision
marginal cost
additional cost of a decision
marginal benefit
additional benefit of a decision
marginal analysis
analysis that involves comparing marginal benefits and marginal costs of a decision
4 factors of production
land, labor, capital, and entrepreneurial ability
land resources
natural resources; ex: water, coal, etc.; gets paid rent
labor resources
human service; ex: doctor or factory worker; gets paid a wage
capital resources
machinery and equipment; ex: computer, factory machinery; gets paid money
entrepreneurial ability
ideas that build firms; gets paid through profit
marginal decision
decision made at the margin of an activity about whether to do a bit more or a bit less of
that activity
unintended consequence
An unplanned result of an decision; can be positive or negative (ex: you take a random
class and love it (+))
intended consequence
the result you expected to get when you made a decision
PACED
decision making method:
P- what is the Problem?
A- list the Alternatives
C- list the Criteria by which the choice is evaluated
, E- Evaluate the choices
D- make a Decision
incentive
a positive or negative environmental stimulus that motivates behavior; ex: reward (+) or
penalty (-)
incentives for groups
consumers: lower price
producers: profit
workers: wage and benefits
savers: interest earned
investors: capital gain
citizens who vote: vote for politicians who vote for their interests
3 economic questions
1. What goods and services will be produced?
2. How will these goods and services be produced?
3. Who will consume these goods and services?
traditional economy
an economy in which production is based on customs and traditions, they do "what has
always been done".
market economy
an economy that allocates resources through decisions made by individuals and firms;
consumers make dollar votes; people who buy get the commodity
command economy
an economy in which production, investment, prices, and incomes are determined
centrally by a government
mixed economy
an economy in which private enterprise exists in combination with a considerable
amount of government regulation and promotion.
entrepreneur
a person who organizes and operates a business or businesses, taking on greater than
normal financial risks in order to do so; incentive of profit, they create jobs
Adam Smith's ideas
-studied and introduced market economies
-labor, land, and capital
-invisible hand: producers make what consumers want (self-interest)
division of labor
idea of specialization in certain industries
characteristics of mixed economy (US)
-private ownership: people own property and make decisions
-competition and prices: incentives and level of comp. drive change in prices of good
-consumer sovereignty: consumers control resources and what will be made
-profit motive: fluctuations drive diff. behavior, people have self-interests
-limited gov't: gov't protects rights through some regulations
voluntary market exchange
you choose; people decide to buy/sell willingly
consumer
2022 - Final Exam Study Guide
economics
the study of how people choose to spend their scarce resources as an attempt to satisfy
unlimited wants
production possibilities curve (ppc)
a graph used to illustrate economic decisions about what/how much to produce
scarcity
when there's not enough resource to produce all goods/services that people want at a
zero price
trade-offs
when you give up something to do something else; result of scarcity
opportunity cost
the most desirable alternative given up as the result of a decision; result of a trade-off
benefit-cost analysis
economic model that compares the costs and benefits of a decision
marginal cost
additional cost of a decision
marginal benefit
additional benefit of a decision
marginal analysis
analysis that involves comparing marginal benefits and marginal costs of a decision
4 factors of production
land, labor, capital, and entrepreneurial ability
land resources
natural resources; ex: water, coal, etc.; gets paid rent
labor resources
human service; ex: doctor or factory worker; gets paid a wage
capital resources
machinery and equipment; ex: computer, factory machinery; gets paid money
entrepreneurial ability
ideas that build firms; gets paid through profit
marginal decision
decision made at the margin of an activity about whether to do a bit more or a bit less of
that activity
unintended consequence
An unplanned result of an decision; can be positive or negative (ex: you take a random
class and love it (+))
intended consequence
the result you expected to get when you made a decision
PACED
decision making method:
P- what is the Problem?
A- list the Alternatives
C- list the Criteria by which the choice is evaluated
, E- Evaluate the choices
D- make a Decision
incentive
a positive or negative environmental stimulus that motivates behavior; ex: reward (+) or
penalty (-)
incentives for groups
consumers: lower price
producers: profit
workers: wage and benefits
savers: interest earned
investors: capital gain
citizens who vote: vote for politicians who vote for their interests
3 economic questions
1. What goods and services will be produced?
2. How will these goods and services be produced?
3. Who will consume these goods and services?
traditional economy
an economy in which production is based on customs and traditions, they do "what has
always been done".
market economy
an economy that allocates resources through decisions made by individuals and firms;
consumers make dollar votes; people who buy get the commodity
command economy
an economy in which production, investment, prices, and incomes are determined
centrally by a government
mixed economy
an economy in which private enterprise exists in combination with a considerable
amount of government regulation and promotion.
entrepreneur
a person who organizes and operates a business or businesses, taking on greater than
normal financial risks in order to do so; incentive of profit, they create jobs
Adam Smith's ideas
-studied and introduced market economies
-labor, land, and capital
-invisible hand: producers make what consumers want (self-interest)
division of labor
idea of specialization in certain industries
characteristics of mixed economy (US)
-private ownership: people own property and make decisions
-competition and prices: incentives and level of comp. drive change in prices of good
-consumer sovereignty: consumers control resources and what will be made
-profit motive: fluctuations drive diff. behavior, people have self-interests
-limited gov't: gov't protects rights through some regulations
voluntary market exchange
you choose; people decide to buy/sell willingly
consumer
