Section 1: Scarcity: the Basic Economic Problem (Lesson 1)

Unit 1: Fundamentals of Economics Study Guide – Chapter 1

NAME: ______Period: ______

Section 1: Scarcity: The Basic Economic Problem (Lesson 1)

Scarcity

Economics

Services

Consumer

Producer

Factors of Production

Capital Entrepreneurship

1. Look up the definition of scarcity in the dictionary. How is the economic definition different from the common definition?

2. Provide 2 examples of how scarcity affects everyone.

3. What are the 3 economic questions that societies face because of scarcity?

4. What are the four factors of production and their uses?

------Section 2: Opportunity Cost (Lesson 2)

Incentives

Utility Economize

Trade-off

Opportunity cost

Cost-benefit analysis

Marginal cost

Marginal benefit

1. Why is choice at the center of economics?

2. How do incentives and utility influence people’s economic choices?

3. What role do trade-offs and opportunity costs have in making economic choices?

4. You are on a limited budget and planning a 4-day trip to St. Louis, MO. Bus fare is $75 each way and the ride takes 12 hours. Plane fare is $150 each way and the ride takes an hour and a half. On a separate sheet of paper, conduct a cost-benefit analysis to help you choose your method of travel. ------Section 3: Analyzing Production Possibilities (Lesson 3)

Economic Model

Production possibilities curve

Efficiency

Underutilization

Law of increasing opportunity costs

1. What is a production curve and how is it constructed? 2. What do economists learn from using production possibilities curves (PPC)?

3. An economy that only produces corn and TV sets. Use the data to create a PPC.

Bushels of Corn Television Sets (in thousands) (in thousands) 10 0 9 1 7 2 4 3 0 4 ------

Remember to label the axis. Label the following points on your PPC: A The point at which the economy makes all TVs and no corn B A point representing efficiency C A point representing underutilization D A point representing an impossible level of production

4. How do PPCs show economic growth?

------Section 4: The Economist’s Toolbox (Lesson 4)

Statistics

Microeconomics

Macroeconomics Positive economics

Normative economics

1. How and why do economists use economic models?

2. How and why do economists use statistics, charts, tables, and graphs? Address each individually.

3. Compare microeconomics with macroeconomics.

4. Explain the difference between positive economics and normative economics.