Unit 1 Foundations of Economics

Basic Economic Concepts Due 1/20

1. Economics is the study of how people choose to use resources. Resources include the
time and talent people have available, the land, buildings, equipment, and other tools on hand,
and the knowledge of how to combine them to create useful products and services. This matters
because the ultimate goal of an economist is to improve the living conditions of people in their
everyday lives.
2. Microeconomics is concerned with single factors and the effects of individual decisions.
Microeconomics concerns with single factors because it focuses on markets making efficient
results and perfect competition. This matters because perfect competition and efficient results
allows companies to offer high quality goods and service.
3. Macroeconomics is concerned with large-scale or general economic factors, such as
interest rates and national productivity. A large-scale view allows us to see an overall of
performance, results of decision making, behavior, and structure. Seeing the economy from this
point of view matters because it allows the national and international government to determine
worldwide economy.
4. Scarcity is the state of being scarce or in short supply; shortage. Scarcity means humans
having unlimited wants with very limited resources to fulfill those demands. Therefore, it matters
because the value would increase causing a cycle that would end at the start only those who can
afford will be able to purchase.
5. Adam Smith is free-market economist famous for his ideas about the efficiency of the
division of labor and the societal benefits of individuals' pursuit of their own self-interest.
Therefore, this is important because labor and benefits should be granted and protected by state,
federal, or within business.
6. Factors of production is land, labor, capital, and entrepreneurship. Land is important
because land is a natural resource that can produce goods such as fruits, vegetables, and grain
which can also feed the animals. Capital is important because it offers technology and tools to
offer services to consumers. Labor also matters because its work that offers goods and services.
7. Goods is a material that satisfies human wants and provides utility. Goods are an
important part of the economy because they are things that are wanted by consumers daily.
8. Services is a provision that is often an economic activity where the buyer does not
generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. This
matters because each individual can offer something that can be used to further another exchange
of service.
9. Trade-Off is involves a sacrifice that must be made to obtain a certain product, service or
experience, rather than others that could be made or obtained using the same required resources.
Trade-off can lead to the idea that humans have to make decisions that can either make them lose
time, energy, knowledge, and etc. this can matter because decisions can cause can impact on the
economic spending chart.
10. Opportunity Cost is the value of the next-highest-valued alternative use of that
resource. Opportunity Cost matters because money being lost can cause a cycle of low income,
This can lead to extend beyond just the monetary costs of a decision, but it includes all real costs

of making one choice over another, including the loss of time, energy and a derived
pleasure/utility.
11. Production Possibilities Curve is a curve depicting all maximum output possibilities
for two or more goods given a set of inputs.

Economic Systems Due 1/25

1. Economic System is a system of production and exchange of goods and services as well
as allocation of resources in a society. Economic system matters because it shows how the
government or society will answer the three fundamental question of economics.
2. Market Economy is an economy in which decisions regarding investment, production,
and distribution are based on supply and demand, and prices of goods and services are
determined in a free price system. This can lead to the belief the economy will function without
government intervention which can lead to a conservative government. Then this can also cause
corruption when change in office occurs.
3. Traditional Economy is an original economic system in which traditions, customs, and
beliefs shape the goods and the services the economy produces, as well as the rules and manner
of their distribution. Traditional economy matters because since everyone knows how to produce
trade can happen in the local areas which can lead to no government intervention.
4. Command Economy is an economy in which production, investment, prices, and
incomes are determined centrally by a government. Command Economy matters to society
because the government wont go out of business, offers free healthcare, and equal income. This
can also have downs such as no individual freedom, change in office, and no voice.
5. Mixed Economy is an economic system combining private and public enterprise. This
matters to society because variety helps progress money growth and it also helps having many
resources to do many things such as trade-off and investments.
6. Circular Flow is money flows to workers in the form of wages, and money flows back to
firms in exchange for products. This matters to society because the cycle of money can lead to
either inflation, or can cause the economy to gain growth over a period of time.

American Economy Due 1/25

1. Capitalism can be described production and distribution are privately or corporately
owned and development is proportionate to the accumulation and reinvestment of profits gained

in a free market. Capitalism matters because this can lead to competition since each private
company puts in their own price, also the government has no involvement in price decisions.
2. Laissez-Faire can be described as running businesses without government intervention
or regulation. As a result, this caused many businesses in the Industrial Revolution to gain lots of
money but also allowed them to exploit workers.
3. Free-Enterprize can be described as a system that has few restrictions given to business
activities and ownership. This matters because governments tend to have minimum ownership of
enterprises in the marketplace, this can lead to businesses having more control in the industry
area with every limited regulations and chargers given by the government.
4. Freedom of Choice can be described as consumers having the choice to decide
something they are willing to spend. This matters because with variety companies and prices a
consumer can lead to making a choice that can affect a company that wasnt decided.
5. Profit can be described as money gained from an amount of money income from a
business, investment, or product. This can lead to money spending which can help the economy
by creating more products, jobs, and economic growth.
6. Profit Incentive is having a motive to doing something in order to gain a profit in return
such as doing your homework in order to achieve a higher grade. This matters because during the
process we can either lose time, energy, and knowledge when you could've been doing something
else to also gain a profit.
7. Competition can be defined as trying to reach goals such as increasing profits, market
share, and sales volume by varying the elements of the marketing mix: price, product,
distribution, and promotion. Competition can lead to wanting to motivate business, workers, and
the government to continue to do better to provide quality goods and services to consumers.
8. Private Property is a property that is owned by an owner and is non-government land
and not open to the public. Private Property matters in our economy because many people take
real estate as an opportunity for investment that can help the local economy by evaluation.
9. Economic Efficiency can be described as for example if any changes made to assist one
person it could harm another. Therefore, this matters because as a country we need to have
balance but we also need to protect our individuals, so this can have an impact on a steady
economy.
10. Economic Growth can be described as an increase in the amount of goods and services
produced per head of the population over a period of time. This matters to the economy because
the government can update the status of the overall growth in economy.