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A fundamental economic problem facing all societies. A condition that results from having scarce resources and unlimited wants of people.
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A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants.
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A basic requirement for survival. Food, water, shelter.
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Something that is desired, but not necessarily needed.
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Basic Economic Questions
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What, How, Who. Each society has to decide what to produce with their scarce resources, and how they are going to produce it. Finally, they need to decide who gets what is produced.
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Factors of Production
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Land or natural resources, labor or human resources, capital resources are the machines used for the production, and entrepreneurship will bring the factors together. All four parts are necessary.
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Gross Domestic Product (GDP)
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The dollar value of all production within a country's borders.
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Products made the individual consumption
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Products manufactured to make other goods or services
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Work done for you. You don't usually receive a good. Ex. Auto repair
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Worth of a good or service as determined by the market
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A measure of satisfaction. Variable
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A place where buyers and sellers make exchanges
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Circular Flow Model
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A simplified model that shows how business firms, individuals, money, resources, goods, and services flow through our economy.
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Where the factors of production are exchanged in the circular flow model
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Where goods and services are exchanged in the circular flow model
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A nation's total output of goods and services increases over time. The circular flow gets larger
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A measure of the amount of output produced by a given amount of inputs in a specific period of time.
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Division of Labor
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Production tasks broken down into smaller parts. Should allow for workers to specialize and increase production
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Famous economist believed in the invisible hand guiding the economy to help nations become wealthy. Also laissez faire, division of labor, and specialization
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Belief that the government should have minimal interference with business.
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The market acts to help people make wise decisions. Businesses have to make and sell products that are needed or wanted to be able to be successful and allow for a healthy growing economy.
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Alternatives that must be given up when something is chosen.
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Opportunity Cost
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The cost of the next best alternative when making a choice. 99% of students that came to school today say that their next best alternative was to be sleeping.
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Production Possibilities Frontier
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An economic model that shows what is possible to produce given a set of circumstances.
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Traditional Economy
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An economic system where the basic economic questions are answered the way they always have been.
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An economic system where the basic economic questions are answered by the government.
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An economic system where the basic economic questions are answered in the marketplace by buyers and sellers.
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The rising of prices
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Capitalism-Free Enterprise
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A system where private citizens own the factors of production
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Economic Freedom
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People are free to choose how to use the factors of production
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Voluntary exchange
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A trade made in which both parties benefit
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Private Property Rights
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The ability to own property allows people to use it for their own benefit. Fundamental for free enterprise
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Making money is the driving force behind the creation and continued development of products in the market place. Fundamental for free enterprise
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Helps create better quality products and lower prices. Fundamental for free enterprise
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Consumer sovereignty
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The customer is always right. Products will only be successful if they are wanted in the market place.
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An economic system that combines elements of different economic systems
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Modified private enterprise economy
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The U.S. economy is mostly free enterprise, but is mixed with elements of other economic systems.
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Common production possibilities for wartime
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Alaskan National Wildlife Refuge
