Unit 1-4 Basic Concepts

Review

economics

Economics is the study, the production , and the distribution of goods and services, it is the study of humans efforts to satisfy the unlimited wants with limited resources
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entrepreneurship

  • entrepreneurship is the development of a business from the ground up — coming up with an idea and turning it into a profitable business.
  • inventive and risk taking spirit. This is a rather new addition to a traditional list.

wants vs needs

terms

scarcity- The basic economic problem that arises because people have unlimited wants but resources are limited
opportunity cost-the loss of potential gain from other alternatives when one alternative is chosen.
goods-tangible commodity. These are bought, sold, traded and produced.
services-Work that is performed for someone. Service cannot be touched or felt.
production possibilities frontier-PPF' A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.). The PPF assumes that all inputs are used efficiently.
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Competitive Markets


  • Law of demand- holding all else equal, when the price of a good rises, consumers decrease their quantity demanded for that good.
  • Law of supply-holding all else equal, when price of a good rises, supplies increase their quantity supplied for that good.

Supply and Demand

Demand refers to how much (quantity) of a product or service is desired by buyers.The quantity demanded is the amount of a product people are willing to buy at a certain price.
Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.

Determinants of Demand

  • consumer income
  • the price of a substitute good such such as a Popsicle
  • consumer tastes and preferences for lemonade.

Determinants of supply

  • The cost of an input to the production of lemonade
  • technology and productivity used to produce lemonade
  • taxes or subsidies on lemonade

frequently asked questions

The "Three Basic Economic Questions" - these are the questions all nations must ask when dealing with scarcity and effcientlly allocating their resources.

  • What to produce?
  • How to produce?
  • For whom to produce?

Questions

What does an increase in demand do to equilibrium price and quantity?

A. decrease them

B. in crease them

C. no change

D. increase in equilibrium price and decrease in quantity

E. decrease in equilibrium price and increase in quantity

What is the want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services)?

A) market
B) utility
C) scarcity
D) profit

E) supply

Which of the following are examples of capitol?

I. A cement mixer

II. A barrel of crude oil

III. A registered nurse

IV. A share of corporate stock


(A) I only

(B) II only

(C) III only

(D) II and IV only

(E) I and IV only