Chapter 1
Economics
the study of how people choose to use their limited resources to satisfy their unlimited wants
Microeconomics
the part of economics concerned with single factors and the effects of individual decisions.
What is a market? is any arrangement that brings buyers and sellers together to do business with each other. What is scarcity? the resources there will never be enough of everything to satisfy everyone completely
What is an economic system?
the system of production and distribution and consumption of goods and services. What is thinking at the margin?
tells us that most of the decisions we make each day involve choices about a little more or a little less of something rather than making a wholesale change.
Macroeconomics focuses on the workings of an economy as a whole.
How does trade make people better off?
Trade really does make people better off. It tells us that by focusing on what we do well and then trading with others, we will end up with more and better choices than by trying to do everything ourselves.
Cost versus benefits tells us that people choose something when the benefits of doing so are greater than the cost.
How do markets coordinate trade?
states that markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers.
Chapter 2
Opportunity Costs
The value of the next best alternative that is given up when making a choice; a measure of what you must give up to get what you want. Entrepreneurship
The willingness and ability to take the risks involved in starting and managing a business. What are the factors of production?
Inputs: Land, Labor, and Capital Outputs: New goods and services
What is human capital?
Is the knowledge and skill that people gain from education, onthejob training, and other experiences. What is utility?
The satisfaction or pleasure one gains from consuming a product or service or from taking an action.
What is financial capital?
Money used for investment or production.
What is productivity?
A measure of the efficiency with which goods and services are produced, stated as a ratio of output per unit of input.
Chapter 3
Rights of individuals in a free enterprise system
Characteristics of a command system
Characteristics of a market economic system
Characteristics of a mixed economic system
Be able to explain the 6 goals of economic systems
Chapter 4
How does division of labor increase productivity? When workers divide the individual tasks that make up a job and become expert at those specific tasks, they are far more productive because each worker is specialized in one step of the manufacturing process
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What is voluntary exchange? The act of willingly trading one item or service for another. Both parties in a voluntary exchange expect to gain from it. How does trade increase the value of something? Trade move goods from people who value them less to people who value them more. What is division of labor? The allocation of separate tasks to different people. Division of labor in the production of a good or service is based on the principle of specialization. What is mass production?
Mass production is the production of large amounts of standardized products, including and especially on assembly lines. What is barter? The direct exchange of goods or services without the use of money. Barter is typical in traditional economies. What is specialization?
The development of skills or knowledge in one aspect of a job or field of interest.
People who specialize become expert in a particular activity. What is the difference between absolute and comparative advantage? Absolute The condition that exists when someone can produce a good or service using fewer resources than someone else. Comparative the condition that exists when someone can produce a good or service at
