What is economics?
the study of scarcity
scartiy forces people to do what?
make decisions about how they will use their resources
what is a trade-off?
an alternative we sacrifice when we make a decision
what is an opportuniy cost?
the most desirable alternative given up as a result of decisions(value)
What is a fixed cost?
cost of expenses that are the same no matter how many units of one good are produced
what is variable cost?
cost that changes with the amount of output produced
what is total cost?
fixed cost + variable cost
what is marginal cost?
the extra or additional cost of producing one additional unit of an output
what is marginal revenue (marginal benefit)?
the extra revenue that results from selling one more unit of an output
what is law of diminishing marginal returns?
a company's goal is to make as much profit as posible
what is profit?
the amount of money left over after all costs of production have been paid
what is traditional?
economic system where tradition and custom govern decisions (little or no use of technology)
What is command?
the government or other central authority makes all economic decisios (no competition)
What is Market?
economic decisions are made by individuals competing to earn a profit based on supply and demand (competition determines price)
What is mixed?
combined elements of pure market and command economics
What did Karl Marx do?
wrote the communist manifesto with Friedrich Engels
What did the communist manifesto describe?
19th century social classes- Protetoriat(own little sell labor to capitalist) and Buregeois (capitalist owns factories and buys labor)
what were the last words of the communist manifesto?
workers of all land unite
what does the communist manifesto lay out?
the foundations of communism
What is Keynesian economics?
way of getting out of and avoiding economic crisis (economist and politicians)
what is demand-side economics?
the idea that government spending and tax cuts help an economy by raising demand
what is capitalism?
an economic system in which private citizens own and use the factors of production in order to seek a profit
what is true enterprise economy?
another term used to describe the american economy
what is private ownership of resources?
the freesom to own and use or dispose of our own property as we choose as long as we do not interfere with the rights of others (incentive to work,save, and invest (keep what we earn))
What is self interest motives?
each person can CHOOSE the type of job they want to have and when and where they want to work
What is profit motive?
the driving force that encourages individual and organizations to make money
what is consumer soverignty?
the idea that the consumer is the king or the ruler of the worker the one who determines what products will be produced
what is markets?
places where the prices of goods and services are determined as exchange takes place
What is competition?
that struggle that goes on between buyers and sellers to get the best products at the lowest prices
What is the important concepts that lead to the base of capitalism?
1. the idea that people will work for economic gains
2.the idea that the government should have a very limited role in the economy
What did Adam Smith do?
write the wealth of nations
what idea was developed from Adam Smith?
laissez-faire economics (to be let alone)
What did Adam Smith believe in?
The invisible hand (guides the nations resources to there most productive use)
What did jobs in the invisible hand include?
Self interset and competition
Economic System: 5 featusre of capitalism