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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
