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Name _________________________________
Economics Study Guide: Unit 1
SSEF1 – Explain why limited productive resources and unlimited wants result in scarcity, opportunity
costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited
productive resources.
b. Define and give examples of productive resources (factors of production) (e.g., land (natural),
labor (human), capital (capital goods), entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses,
and governments confront scarcity by making choices.
Trade off
Opportunity Cost
PACED-model (not in book)
Cost-Benefit Analysis
Factors of Production
Resources (aka Productive Resources)
Land (natural resource)
Labor (human capital)
Capital (physical/financial
SSEF2 – Give examples of how rational decision making entails comparing the marginal benefits and
the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the trade-offs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed
the marginal costs.
Economic Model
Marginal Cost
Production Possibilities Curve
or Frontier (PPF)
Opportunity Cost
Marginal Benefit
Marginal Analysis
Marginal Utility
SSEF3 – Explain how specialization and voluntary exchange between buyers and sellers increase the
satisfaction of both parties.
a. Give examples of how individuals and businesses specialize.
b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
Specialization (pg. 16)
Division of Labor (pg. 16)
Voluntary Exchange (pg. 47)
Economic Interdependence (pg. 17)
Productivity (pg. 15)
Name _________________________________
SSEF4 – Compare and contrast different economic systems and explain how they answer the three
basic economic questions of what to produce, how to produce, and for whom to produce.
a. Compare command, market, and mixed economic systems with regard to private ownership,
profit motive, consumer sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the
broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.
Traditional Economy (pg. 34)
Command Economy (pg. 35)
Market Economy (Free Enterprise or Capitalism) (pg. 36)
Mixed Economy (pg. 51)
Consumer Sovereignty (pg. 50)
Competition (pg. 48)
Standard of Living (pg. 25)
Profit Motive (Incentive) (pg. 48)
Economic Freedom (pg. 41)
Economic Growth (pg. 43)
Economic Security (pg. 42)
Economic Stability (pg. 43)
Economic Efficiency (pg. 42)
Economic Equity (pg. 42)
SSEF5 – Describe the roles of government in a market economy.
a. Explain why government provides public goods and services, redistributes income, protects
property rights, and resolves market failures.
b. Give examples of government regulation and deregulation and their effects on consumers and
Property Rights (pg. 47-8)
Regulation *
Deregulation (pg. 304)
Market Failures (externalities)
Income redistribution (pg. 258)
Transfer Payments (pg. 257)
TANF (Temporary Assistance for Needy Families) (pg. 397)
Public goods & services(pg. 176 & 183)
Social Security (F.I.C.A.)
Worker’s compensation*
Public-welfare programs (pg. 268)
SSEF6 – Explain how productivity, economic growth, and future standards of living are influenced by
investment in factories, machinery, new technology, and the health, education, and training of
a. Define productivity as the relationship of inputs to outputs.
b. Give illustrations of investment in equipment and technology and explain their relationship to
economic growth.
c. Give examples of how investment in education can lead to a higher standard of living.