Chapter 1: What Is Economics s1

Name: ______Chapter 1: What Is Economics?

Economics: the study of how individuals, families, businesses, and societies use ______resources to fulfill their ______wants.

To economists, wants and needs differ. Something that is necessary for basic survival is a "______" and anything else is a "______."

Why can't people fulfill all their needs and wants? Scarcity: ______wants with limited ______

*The basic problem of economics—forces people to make ______when satisfying their ______and ______.

Factors of Production When economists talk about scarce ______, they are referring to four factors that must be present for any good or service to be produced:

 ______– natural resources without human intervention  ______– the work people do o ______– things you can touch o ______– activities done for others for a fee  ______– manufactured goods used to make other goods and services o Increases ______– ability to produce things in better and faster ways  ______– ability of individuals to start new businesses, introduce new products and processes and improve techniques o Risky – _____% fail  Technology? – any advancement that allows things to be done more efficiently

Examples? Name: ______

Because of ______, people must make ______about how they will use their resources. These choices result in trade-offs and opportunity costs.

Choices Trade-offs & Opportunity Costs

______– sacrificing one good or service for another (what do you have to give-up?)

______– the value of the very next best alternative

What is the value of what you had to give-up?

You are always losing something

Economists use a ______to reveal trade-offs and opportunity costs involved in business decisions.

Graph shows the ______combinations that can be produced from a ______amount of resources (helps decide how to use resources)

Ex: Guns (military) vs. butter (civilian) - how decide?

0 1 2 3 4 5 6 7 8 Name: ______

Schools of Thought

This chapter also focuses on how economic models help economists analyze ______, and it concludes with an examination of why there are different schools of economic thought.

______-economics - economics of small units Examples: ______and ______

______-economics – economy as a whole; large units Example: ______

Economy – all the activity in a nation that together affects production, distribution and use of goods

______– simplified representations of the real world (a ______look at a complex econ situation)

Good way to create a ______– educated guess

Too many factors to accurately predict

Economists deal with ______

Influenced by ______, government, etc –- many different views and theories

Economists help us by informing us as to ______short- term and long-term outcomes Name: ______

Chapter 1 Quiz

1. In economics, "needs" refer to ______a) the basic, minimal things people must have to survive. b) things that people do not have. c) luxuries such as new televisions, computers, and VCRs. d) a good education and adequate health care.

2. Scarcity of resources is always present because ______a) there will always be natural disasters to affect the production of goods and services. b) we live in a world where poverty still exists. c) people are not willing to change their unlimited wants. d) competing alternative uses for resources always exist.

3. The main factors necessary for the production of goods and services are ______a) land, labor, capital, and services. b) capital, land, entrepreneurship, and labor. c) labor, capital, land, and natural resources. d) human resources, labor, capital, and land.

4. If your city made a trade-off to spend $1 million on a recycling facility instead of a fitness and health center, the opportunity cost of a cleaner environment would be ______a) fewer employed people. b) less garbage to dispose of. c) fewer colleges and universities. d) fewer fit and healthy people.

5. A production possibilities curve is used by economists to show ______a) people and businesses how much of each item to produce. b) the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time. c) the trade-offs and opportunity costs of producing possible combinations of goods. d) all of the above. Name: ______6. Which of the following statements is NOT true about the use of economic models? a) Economic models can simulate what would happen in the real world given certain economic circumstances. b) There may be many economic models for a particular problem. c) Economists use economic models to make value judgments about economic decisions. d) Economic models cannot predict all the factors that might influence people's behavior.

7. Economists do not all agree on the same solutions to problems because ______a) they have differing opinions, beliefs, and social views. b) their views are dictated by their governments. c) they deal with facts, and the facts change. d) individual human behavior is not always predictable.