Unit 1: Fundamental Economic Concepts

Chapter 1 What Is Economics?

Lesson 1-1: Scarcity and Science of Economics I. The Fundamental Economic Problem A. Scarcity is the condition where unlimited human wants face limited resources. B. Economics is the study of how people satisfy wants with scarce resources. C. Needs are required for survival; wants are desired for satisfaction. D. There Is No Such Thing As A Free Lunch

II. Three Basic Questions A. What must we produce II. Three Basic Questions A. What must we produce? Society must choose ____________________. B. How should we produce it? Society must choose ______________. C. From who should we produce? Society must choose ____________________________________.

III. The Factors of Production A III. The Factors of Production A. Factors of production are resources necessary to produce what people want or need. B. Land is the society’s limited natural resources- ______, _______, ______, _______, etc. C. Capital – D. Labor –

IV. The Scope of Economics A IV. The Scope of Economics A. Economics deals with: GDP, unemployment rate, government spending, tax rates, etc.

Lesson 1-2: Basic Economic Concepts I. Goods, Services, and Consumers A. Goods – items that are economically useful. Classified: Tangible consumer/capital and durable/nondurable. B. Services – C. Consumers -

II. Value, Utility, and Wealth A II. Value, Utility, and Wealth A. Value is worth expressed in ______ and ____. B. Utility is a good’s or service capacity o provide satisfaction, which varies with the wants and the needs of each person. C. Wealth is the accumulation of goods that are ____, ______, _____, and _______ to another person. Wealth does not include _____.

III. The Circular Flow of Money A III. The Circular Flow of Money A. Markets are _______ for buyers and sellers to trade. The are classified as: _____________. B. A factor market is where people earn their incomes. Four factors: _____, ______, _____, _____. C. A product market is where people use their _________ to buy products. These center on ____________________.

III. Productivity and Economic Growth A. Productivity is a measure of the amount of output produced _______________________. B. Specialization and divisions of labor ____________________. C. Investing in __________ improves productivity. D. Economic growth depends on ___________. Yet, an economy’s productivity may be affected by its _________.