| A | B |
|---|
| Scarcity | Most basic economic problem |
| Key economic questions | what to produce, how to produce, for whom should they produce |
| Traditional Economy | Things are done according to tradition, progress is very slow, found in third world countries |
| Command Economy | Government owns the businesses and controls the economy |
| Market Economy | Businesses and individuals are free to make their own decisions |
| Capitalism | Economic resources are privately owned by individuals rather than by the government |
| Free Enterprise | Individual owners of businesses are free to decide what they will produce |
| Characteristics of Market Economies | Private enterprise, private property, profit, competition |
| Private Enterprise | An individual's right to own a business, select a market to enter, and product with limited government direction |
| Private Property | You can own, use, and dispose of things of value |
| Profit | The amount of money left over from sales after subtracting all of the operating expense |
| Profit motive | The desire to work hard, be creative, and to satisfy customers |
| Competition | Rivalry among businesses to sell their products and services to consumers |
| Advantages of competition | High quality products, low prices, good service, etc. |
| Needs | Things that are necessary for our survival |
| Wants | Things that add comfort and pleasure to our lives |
| Example of Needs | Food, clothing, shelter |
| Example of Wants | DVD player, pager, camera |
| Goods | Things you can see and touch |
| Services | Satisfy needs and wants through the efforts of people or equipment |
| Economic Resources | The means through which goods and services are produced |
| Three kinds of economic resources | Natural, Human, Capital |
| Natural Resources | The raw materials supplied by nature |
| Human Resources | The people who work to produce goods and services; Labor |
| Capital Resources | The tools, equipment, supplies, and buildings that are used to supply goods and services |
| Type of capital resource | Money |
| Economic Decision Making | Process of deciding among several alternative wants the one you most desire |
| Steps of Decision Making Process | Define problem, identify choices, evaluate choices, choose one, act on choice, review decision |
| One goal of an economy | To be healthy and to have a steady growth in the production of goods and services |
| GDP | Gross Domestic Product |
| Gross Domestic Product | The total dollar value of all goods and services produced in a country in one year |
| GDP categories | What consumers spend, what businesses spend, what government spends |
| Labor productivity definition | The measurement of the number of items produced per worker |
| Labor productivity formula | Number of units produced divided by number of hours worked |
| Inflation | The sustained increase in the general level of prices for goods and services |
| Deflation | A sustained decrease in the general level of prices for goods and services |
| Government goal for inflation | A controlled, general rate of inflation |
| Business cycle | Recurring ups and downs of GDP |
| Phases of Business Cycle | Prosperity, Recession, Depression, Recovery |
| Characteristics of Prosperity | High employment, wages, and demand |
| Characteristics of Recession | Economy slows down, demand decreases, unemployment increases, GDP slows down |
| Characteristics of Depression | Very high unemployment, weak sales of goods and services, high business failures, GDP falls rapidly |
| Characteristics of Recovery | Unemployment, demand, and GDP begins to increase |
| Consumer Role | Make buying decisions |
| Worker Role | Work hard, provide high quality goods and services, and spend wages in the economy |
| Citizen Role | Vote for political offices, give back to the community |
| Standard of Living | The way you live as measured by the kind and quantity of goods and services you can afford |
| Quality of Life | The satisfaction and enjoyment you get from your life |
| Public Goods | Things provided by the government for the benefit and enjoyment of all |
| Demand | The amount of goods and services that consumers are willing and able to buy |
| Supply | The amount of goods and services that businesses are willing to provide |
| If demand goes up.... | Price goes up |
| If demand goes down.... | Price goes down |
| If supply goes up.... | Price goes down |
| If supply goes down.... | Price goes up |
