Economics Review

The study of how a society uses its resources to satisfy its wants and needs.

Three basic Economic Questions 1. What and how much will be produced? 2. How will it be produced? 3. For whom will it be produced?

Scarcity- all resources are limited and therefore are scarce. Everyone cannot have everything they want. There is not enough stuff to go around.

Needs- are our basic needs to survive, food, clothes, and shelter Wants- are everything else and they are unlimited Ex. I need to eat I am hungry Ex. I want a new car, new mp3 player etc…

What are the resources we have to use to satisfy our wants and needs? Land- natural resources we have to produce goods and services Good- a physical thing you can hold Service- some thing that gets used up right after it is purchased

Market Economy Individuals own and operate factors of production. Based on Supply and Demand. – AKA: Free enterprise, Capitalism Examples: United States, Great Britain, Japan

Command Economy Government controls all factors of production and government makes decisions. – AKA: Socialism, Communism Examples: Cuba, China, Laos, North Korea

Traditional Economy Based on agriculture, customs and traditions, and the main job is farming or hunting. – found today in underdeveloped, agricultural parts of South America, Asia, and Africa. Examples: Chad, Haiti, Rwanda

Mixed Economy A combination of two economies. – usually means an economy that contains both privately-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics – Most effective economy for providing goods and services Examples: USA and China

Gross Domestic Product AKA- GDP Measures the economic income and output of a given country’s economy. – Economists use GDP data to measure the economy’s growth

5 Factors of Production 1.Land-Natural occurring resources which supply is fixed. Used to produce goods and services. Example: Mineral Deposits 2. Labor-measure of work done by a human being. Example: factory workers, medical personnel, and teachers. 3. Capital- Anything used to produce a good or service. Not naturally occurring. Example: If you make cars you need machines to make the metal that is used in the cars. 4. Entrepreneurs- Person who is a risk-taker and owns and operates a business.

5. Resources Renewable- A resource that can be replaced. – Example: trees Non-renewable- A resource that cannot be replaced. – Example: diamonds

Human Capital People working. Skills and knowledge used to perform a task. – Example: College Degree

Trade Barriers A trade barrier is a general term that describes any government policy or regulation that restricts international trade. Quota- a physical limit set on the quantity of a good that can be imported. Embargo- Prohibition of trade. Tariff- A tax placed on goods imported into a country.

Specialization When a country focuses on producing a main product. Why? Each person specializes in one occupation, to become the best at that job as possible, while others do the same with other occupations.

Voluntary Trade When products and goods are exchanged for other products or services, the result is a trade. Voluntary trade describes a market where buyers and sellers have the right to sell and buy by their own preference or refuse to if they so choose. Voluntary trade also describes a person’s freedom to choose to work for compensation versus being forced into labor.

Currency Currency- Shells Precious Metals – Silver – Gold Bills or Notes – Paper $ (Dollars, Peso, Euro, and so on) Plastic – Debit and Credit Cards Currency Exchange- Different countries use different currencies. Different currencies are not equal and are worth different amounts. Generally, exporters prefer to be paid in their country’s currency (or in U.S. dollars, which are accepted all over the world).