Vocabulary Preview Economics

Basic Economic Terminology and Economic Systems

PRINCIPLES OF ECONOMICS

Society and Scarce Resources: – The management of society’s resources is

important because resources are scarce.– Scarcity. . . means that society has limited

resources and therefore cannot produce all the goods and services people wish to have.

– This is the classical economic view…– What do you think of this definition? What

factors does this definition leave out?

Scarcity or Allocation??

Scarcity of resources vs. allocation of resources

Factors of Production: Land, Labor, capital

entrepreneurs

• The building blocks of capitalism

Opportunity cost: The Cost of Something Is What You Give Up to Get

it.

LA Laker basketball star Kobe Bryant chose to skip college and go straight from high school to the pros where he has earned millions of dollars.

But Michael Jordan earned his college degree and went to the pros

Paradox of value

Utility: The amount of usefulness we get from a product or service. It tends

to decline with number or reptition

Invisible hand

Factors of Production

• Land

• Labor

• Capital

• Entrepreneur

Mixed Economy (social democracy)

• Welfare states• Generous welfare and

health benefits• 6 week vacation• Family and medical

leave• Single-payer health

care• High tax rates

Command (communist economy):government ownership of all parts of

the economy/also controls social lives of the people