Download Econ Unit 1 Test Review Answer Key

Economics Review
Unit 1- The Market Economy
ANSWERS
Be able to explain and give examples of the following economic concepts:
List and give examples of the 3 Factors of Production/ Types of Economic Resources (same thing)
NATURAL, LABOR, CAPITAL
What is the primary definition of resources – meeting unlimited wants with limited RESOURCES
RESOURCES ARE THE THINGS USED TO PRODUCE GOODS AND SERVICES AND INCLUDE:
NATURAL, HUMAN AND CAPITAL RESOURCES
Supply & Demand (what causes each to increase or decrease) list reason for demand to increase or
decrease AND supply to increase or decrease. Must be able to find on a graph
SUPPLY: HIGHER THE PRICE, THE MORE SUPPLY
DEMAND: HIGHER THE PRICE, THE LESS DEMAND
Opportunity Costs
BENEFIT YOU LOSE WHEN YOU USE SCARCE RESOURCES (I PAID TO GO TO THE GAME SO
NOW I CAN’T BUY ICE CREAM)
Equilibrium Price
WHEN THE SUPPLY AND DEMAND CURVES MEET – RARELY HAPPENS IN THE “REAL”
WORLD
Elasticity (Inelastic Demand vs. Elastic Demand)
ELASTIC: CHANGE IN PRICE = CHANGE IN DEMAND, INELASTIC = CHANGE IN PRICE, VERY
LITTLE CHANGE IN DEMAND
Production Possibilities Curve
DEMONSTRATES WHAT A MANUFACTURER COULD PRODUCE (IF I MAKE 1000 FORD F150’S,
I CAN ONLY MAKE 500 FORD F250’S)
Entrepreneurship:
A PERSON WHO ORGANIZES AND RUNS A BUSINESS, AN EMPLOYER OF PRODUCTIVE
LABOR
Productivity:
-
what does it mean to the US? MORE PRODUCTIVE = BETTER FOR OUR ECONOMY
How do you increase it? FIND THE RIGHT PRODUCTION POSSIBILITY CURVE, FIND
MORE EFFICIENT WAYS TO COMPLETE THE WORK
Why is it good? ALLOWS BUSINESS TO PRODUCE MORE AT A LOWER COST,
ALLOWS BUSINESS TO INCREASE SUPPLY WHILE DECREASING COST
Private Enterprise:
-
Profit motive ALL BUSINESS EXISTS TO CREATE A PROFIT
Characteristics (limited Gov. control, private property, price-directed system, etc. others)
Importance of Entrepreneurs (and definition) ENTREPRENEURS ARE THE BACKBONE
OF AMERICAN ENTERPRISE, EMPLOY MILLIONS
Participants
Three Basic Economic Questions (and answers to these questions)
WHAT TO PRODUCE, HOW TO PRODUCE, HOW PRODUCTS WILL BE ALLOCATED (WHO
GETS WHAT?)
Economics Wants vs. Needs (limited vs. unlimited, etc.)
WANTS ARE UNLIMITED, THINGS WE DESIRE
NEEDS – REQUIRED TO SURVIVE
Price: THE WORTH OF A PRODUCT OR SERVICE, THE AMOUNT WE AS CONSUMERS ARE
WILLING TO PAY FOR A PRODUCT OR SERVICE
Buyer’s and Seller’s Markets
BUYERS: SMALL DEMAND, LARGE SUPPLY, LOWER PRICES
SELLERS: LARGE DEMAND, SMALL SUPPLY, HIGHER PRICES