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What is an opportunity cost?
The value of the next-best alternative that is given up as a result of making a particular choice.
What is economics?
Economics is the study of the ways that humans organize themselves to make the necessary choices about how scarce resources are to be used to produce the goods and services necessary to satisfy human wants and needs.
What is "macroeconomics"?
The study of how the major components of an eonomy interact; it includes the topics of unemployment, inflation, interest rate policy, and the spending and taxation policies of government.
What is "microeconomics"?
The study of the outcomes of decisions by people and firms through a focus on the supply and demand of goods, the costs of production, and market structures.
Why does an economy face scarcity?
Because of limited national income.
What are the three fundamental questions in economics?
- 1. What to produce?
- 2. How to produce?
- 3. For whom?
Throughout history, how has humankind coordinated its economies?
- By using some blend of four C's:
- 1. Cooperation
- 2. Custom
- 3. Command
- 4. Competition
What is cooperation and when was it first used?
Cooperation is deciding cooperatively what work needs to be done, how it will be done, and who is to obtain what share of the produce. It was first used by members of small groups of hunters thousands of years ago.
What is custom and when it was first used?
Custom dictates who perfirns which task, and implies that traditional technology is superior to new ways of doing things. It was first used by the European feudal society in the Middle Ages - sons followed the work of their fathers and daughters followed the roles of their mothers, serfs were require, by tradition, to share a portion of their produce with the feudal lord.
What is command and when was it first used?
Command is having most of the important economic questions answred by the orders of those in power. It was first used by ancient civilization, such as Egypt 4000 years ago. In the twentieth century, command was the prevailing coordinating mechanism in fascist and communist regimes.
What is competition and when was it first used?
Competition is associeted with market economies. Market economies emerged 250 years ago and the forces of supply and demand determine the prices of both consumer goods and resources.
What are factors of production?
The productive resources that are avilable to an economy, categorized as labour, land, capital, and enterprise.
What is labour?
Human physical and mental efforts that can be used to produce goods and services.
What is capital?
All human-made resources that can be used to produce goods and services.
What is land?
Any natural resource that can be used to produce goods and services.
What is enterprise?
The human resource that innovates and taskes risk.
How are incomes earned in a market economy and what factor of production are they each related to?
Incomes are earned through the payment of wages (labour), interest (capital), rent (land), and profits (enterprise).