Economics is the study of how people use their scarce resources to meet their needs and wants.
Voluntary exchange is the exchanging of money for a good or service by choice.
A market is the place where that exchange takes place.
A market economy is present when voluntary exchange is the primary means of organizing the production of goods and services.
The factors of production are used to produce goods and services. They are:
LAND
LABOR
CAPITAL
ENTREPRENEURSHIP
UNDERSTANDING SCARCITY IS THE KEY TO UNDERSTANDING ECONOMICS. ALL RESOURCES ARE SCARCE !!! SCARCITY IS THE INABILITY TO SATISFY ALL OF EVERYONE'S WANTS.
Opportunity cost is the best alternative you give up when making a choice
A trade-off takes place when you give up some of one thing to have more of another. Marginal benefits and marginal costs must be considered when choosing to make a trade-off.
An economy is a system that develops when the key players make choices as to how to determine the allocation of resources.
Basic Economic Questions are:
1. What goods and services are to be produced and how many?
2. How are these goods and services to be produced?
3. Who receives and these goods and services?
Macroeconomics is the study of the economy as a whole.
Microeconomics is the study of individual consumers and businesses.
Four Pillars of Free Enterprise:
1. private property - protected by the US and State Constitutions
2. price sysem - provides information and incentives to buyers and sellers
3. market competition - takes place among sellers (producers)for resources and among buyers for products; sellers also compete with other sellers for buyers... they are seeking to make a profit; producers compete with other producers to be more efficient, conserve resources, increase output and reduce costs and prices
4. entrepreneurship - is the creative, innovative, managerial/organizational
skill with a willingness to take a risk in order to produce a good or service.
The circular flow chart shows how money moves from housesholds to businesses through the markets for goods/services and resources.
Functions of Money:
1. medium of exchange - money for a good or service
2. store of value - lasting value to spend now or save for later
3. measure of value - indicator of the relative value of goods and services
Goals of the US Economic System
1. Full employment
2. Economic growth
3. Price stability
4. Economic freedom
5. Economic security
6. Equity
7. Efficiency
WHO IS ADAM SMITH???