Unit 1 Review Sheet Economics

1 Needs and wants Resources

2 We become better decision makers as a: consumer, worker, voter.

3 The fundamental problem of economics. There is not enough resources to meet the desires of society.

4 Land Labor Capital Entrepreneurship

5 There is a cost involved in regards to anything produced or consumed.

6 Capital Goods– Goods used to produce other goods. Services- Work performed for us Consumer Goods – goods we buy for personal use.

7 Goods – tangible items purchased by consumers Services- work that is performed for you by someone else.

8 Opportunity Cost- the value of the items given up when one is chosen over another.

9 Needs – items required for survival. Wants – items we desire to have but are not necessary for survival.

10 Durable goods – goods that are designed to last 3 years or longer. Primarily, they are bought by consumers.

11 Production Possibilities Frontier – illustrates different combinations of goods that can be produced. It illustrates the concept of opportunity cost.

12 The economy is at maximum production when a firm is on the curve. Inside the curve means not all resources are being used.

13 If a firm is operating on the curve, the only way production of one good can be increased is to decrease the production of the other good.

14 The PPC only illustrates the different combinations of production. It does not show the ideal level of production.

15 Government planners.

16 A command economy can change direction in a short period of time because the central planners can quickly give orders to change production.

17 A market economy may not adequately provide for the needs of those who do not work.

18 The market economy provides a wide variety of goods and services. There is economic freedom for consumers and producers.

19 Occupations are determined by birth.

20 The consumers determine what will be produced when they make their buying decisions.

21 Decentralized decision-making is when individual firms determine what they will produce. This is an essential feature of a market economy.

22 An economic system is successful when it meets the needs and wants of society.

23 Economic growth Economic efficiency Price stability Full employment Economic freedom

24 Economic growth is attained through: more workers, more productive workers, more plants, improved technology.

25 Economic growth is necessary to provide the goods and services of a growing population.

26 Voluntary exchange occurs when a buyer freely purchases a good from a seller who wishes to sell the item. Each person willingly enters into the transaction.

27 Adam Smith

28 Government control means government planners determine what will be produced. Government regulation means the government has standards on how goods will be produced.

29 Through their purchases, Consumers determine what will be produced.

30 Entrepreneurs create new products, start new businesses, and hire new workers.

31 Capitalism Free Enterprise

32 Land - rent Labor - wages Capital - interest Entrepreneurship - profits

33 Private Property Competition Limited Government Refer to notes for significance of each pillar.