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What is Scarcity?------a gap between infinite wants and finite resourcesWhat is a succesful economy?------The gap between the wants and having the wants is small or non-existantWhat is an unsuccesful economy?------Theres a large gap between what people can have and what they wantWhat is the definition of a need?------things you must have to survive.What is the definition of a want?------Things you can live without.

What are the 3 basic needs?------Shelter, food, and clothing.Definition of Shelter.------keeps you warm when its cold, dry when its wet, cold when its warm. can be a hut or a mansionWhat are the 3 basic questions every economy has to answer?------1)HOW to produce,2)WHAT to produce3)FOR WHOM to produceWhat are the 4 factors of production?------Land, Labor, Capital, Entrepeneurship.Define Land.------all natural resourcesDefine labor.------workforce.Define Capital------the machines necassary for production.Define Entrepeneurship.------individuals who take risks, use their own money to start buisnesses.What is Gross Domestic Product?------dollar amount of all the final goods and serv

ices produced in a country in one year.Wealth------the total of GOODS only of a country expressed in monatary terms.Define Service------intangible but has value(you pay money for it)- anything thatsomeone does for you for money.Consumer------the part of the economy that buysValue------what the items are worth expressed in money form.Paradox of Value------connection between scarcity and value- water is valuale butplentiful so cheaper than diamonds which are valuable and scarce.Utility------has some use- items with utility and scarcity have greater value.Define labor.------workforceDefine Capital------the machines necassary for production.Define Entrepeneurship------individuals who take risks, use their own money to sta

rt buisnesses.What is Gross Domestic Product?------dollar amount of all the final goods and services produced in a country in one year.Definition of Good.------a tangible object-(s/t you can hold in your hand.)What is the Circular Flow of Economic Activity?------constant back and forth between the product and factor markets- workers sell their services in the factor markets then buy in the in the product markets.Productivity------what is the output(the final number of goods produced) by a certain number of workers.measuring how much output by a number of inputs(workers)Division of Labor------an assembly line.What is Trade Offs?------going through a processof choosing among many wants thatyoiu have. - you make a choice what your going to do to satisfy all your wants.

Oportunity Cost------The cost of the runner up.Define Traditional Economy------they answer the 3 basic questions based oncustom and tradition handed down from generation to generation. Your role in the economyis set- whatever your group has done the generation before is what you will be.Advantages and Disadvatages of Traditional economy------Advan.-everyone knows whatrole to play- no uncertainty of what to produce--no uncertainty of how to produce because you do what your parents did.Disadv.-discourages new ideas and ways of doing thingsDefine Command Economy------A central authority makes most of the decisions to answer the 3 basic questions.- Economic Decisions are made by the government- the people have little influence over the economy.Advantages and Disadvantages of a Command Economy------Advan.-it can change direction drasticly in a relatively short time.

Disad- not designed to meet the wants of the consumers, even tho the basic needsare provided.Define Market Economy------People and firms act in their own best interests to ans

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wer the basic questions.Define Market------an arrangement that allowsbuyers and sellers to come together inorder to exchange goods and services.Advantages and Disadvantages of a market economy.------Ad.- able to adjust to change gradually, individual freedom to everyone, lack of government interference, incredible variety of goods and services, High degree of consumer satisfaction.Dis.- doesnt provide for people too young, too old, or too sick to work, workers

and buisnesses face uncertainty as a result of competition and change.Economic Freedom------tremendous amount of opportunity to decide what you want todo.Economic Efficiency------economic decision making must be efficient so that benifits gained are greater than costs incurred.Economic Equity------everyone has the same amount of opportunity to succeed in theeconomy- equal pay for equal work.Economic Security------"Safety Net" Laws are made so that you're safe and secure in case you're out of the market.Full Employment------as many people that want to be working are workingPrice Stability------to avoid erratic prices either way up or down.Capitalism------Market Economy

Voluntary Exchange------the act of buying and sellingPrivate Property Rights------the right to own private property-free to buy what ever you wantProfit Motive------no one is in buisness except to make money.Competition------The more competition there is, the better it is for the consumer.with no competition, the price is very high.Forms of Buisness Organizations:------1)Single Ownership2) Partnership3) CorporationDefine Single Ownership------one person owns the buisness- you make all of the decisions- You haveall the responsibilities but all the benifits.Define a Partnership buisness------2 or more people in a buisness together.Why do people go into partnership?------1) to share burden of owning the buisness

2) Help with money.Define Corporation Buisness------man made type of buisness- solves problems of single ownership or partnership.Unlimited Liability------no limit to what you oweLimited Liability------Legal separation between the owners of the corporation andthe debt.Stock Holders------the amount that you could lose os equal to the amount of your original investment.Define a Bond------A loan- They lend out the Company moneyDefine a Peinciple------amount of the loan to be repaidMuturity Date------when your gonna get your money back from the bond.Merge------When 2 buisnesses join togetherHorizontal Merge------2 buisinesses that perform the same service(clothing companies) combine.Verticle Merge------One company owns an end product, and also owns all the thingsthat are needed to make the product. (shoe company owns the shoe, and the company that makes the sole of the shoe, and the transportation companies to get the shoe from place to place and the leather company ect.)Conglomerate------one "parent" company owns a lot of "children" companies that make totally different things(KRAFT makes food, and they also make sneakers and a bank) no one of the companies produce more than 50% of the profit.Multi National------the headquarters of the company is in one country, but they have branches in all different countries(cocacola)Community and Civic Orginizations------Non Profit Organization- all of the money collected to the orginization is used for the organization to further the benifit

s of what the orginizaton is doing.Cooperative Organization------If your not a member of the Co op, you dont get thebenifits.

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Labor Union------there's a negotiation in the end for more benifits for the members of this union.Demand------the desire to buy something together with the ability and willingnessto pay for it.Law of Demand------Price and Quantity demanded at that price are inversely related- As price goes down, quantity demanded goes up; As price goes up, quantity demanded goes down.

Demand Curve------starts off at top leftand slopes down to bottom rightDeminishing Marginal Utility------When a person gets less satisfaction as you addone more of the item.(you get sick of the item.)How does the Income Effect explain the law of demand?------if you have a buget, and you're able to get more than the budget's worth, the amount in the buget is stretched- When price goes down, quantity demanded goes down.How does the Substitution Effect explain the Law of Demand?------if 2 items are substitutes for each other, and you don't care which one you buy(2 orange juice companies), You will buy the substitute of the company with the lower price.- Thedemand for it will go way up.What is Demand Elasticity?------measures the degree of responsiveness when price changes- How the quantity demanded changes.

In-elastic Product------there isn't a noticeable change in quantity demanded whenthere is a change in price.What are the 3 determinates of Demand Elasticity?------1)can the purchasr be delayed?"2)Are there adequate substitutes available(if yes its elastic)3)Is the purchase a large portion of your income?How do we define Supply?------Supply is defined as the quantity offered for sale at a range of prices.What does the Law of Supply State?------when price does up, quantity offered for sale goes up.; When price goes down, the amount offered for sale goes down. - directly related.What is Elasticity of Supply?------it measures how the amount offered for sale isaffected by the changes in price. If the price goes down, less will be offered f

or sale. A product in Supply is inelastic when no matter how much the price goesup, he cannot offer more for sale.Law of Variable Proportion------How many workers a producer should hire.Marginal Product------How many widgets did the worker who was hired that day producetaward the total output.How do you find profit?------profit= Revenue-costs.Fixed costs------costs that are not tied to the output- money that doesnt change according to the money made.Variable Costs------totally dependent on the level of output.Marginal Costs------The cost of adding one more workerRevenue------money coming inSurplus------more widgets offered for sale than the amount demanded(extra items) When there is a surplus, the producer will lower the prices.Shortage------When there is more demanded than supplied- With a shortage, price will go up.Market Equilibrium------When amount demanded equals amount supplied.Pure competition------many many sellers, many many buyers- The product is identical - There is only one price in the market- NO ONE FIRM HAS CONTROL OVER THE PRICE. They do have control over the total output, and over the costs. They keep there costs low so they can make a big profit.Monopolistic Competition------accounts for many of the everyday products we buy- many many sellers, many many buyers. Products can either be identical or slightlydifferent.(real or perceived differences)- bacause of this, the prices are notall going to be the same- some firms will have some influences over the prices.How can a monopoly be legal?------1)geographic monopoly-no one else in neighborhoo

d selling your product2)Natural Monopoly- gov. decided your company should have no competition3)Technological Monopoly- Pantent

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4)Government Monopoly- postal service ect.oligopoly------a few(half a dozen) large companies dominate the market- There areonly a few really big competitions. These companies are dependant on each othersbehavior.(follow the leader) so they dont lose their % of market share.Monopoly------one seller- no competition- the seller has total control over the price.