2-1 Review: Economic Concepts

Economics is the study of:

• The study of how individuals and societies make decisions about resources, production, distribution, exchange, and consumption of goods and services

• the laws of society

• the history of the economy

• the structure of the human body

(a)   is the study of the behavior and decision-making of individuals and businesses in an economy.

The difference between micro and macro economics is:

• Microeconomics studies individuals and businesses, while macroeconomics studies the economy as a whole.

• Microeconomics focuses on government policies, while macroeconomics focuses on household decisions.

• Microeconomics deals with international trade, while macroeconomics deals with local businesses.

• Microeconomics is only about money, while macroeconomics is only about goods.

The three economic questions are:

• What to produce, how to produce, for whom to produce

• What to buy, where to sell, how to market

• How to save, where to invest, when to spend

• Who to tax, how to spend, what to import

Scarcity is a situation where resources are limited. What does scarcity cause?

• It causes inflation and for people to make choices about how to use resources.

• It leads to unlimited resources for everyone.

• It eliminates the need for decision-making.

• It ensures everyone gets what they want.

Resources are:

• things that are used to produce goods and services

• only natural materials found in the earth

• items that cannot be replaced or reused

• objects that have no value to humans

The difference between economic wants and non economic wants is:

• Economic wants are desires for goods, services or intangible items that can only be acquired by spending money

• Economic wants are always related to luxury goods, while non economic wants are basic needs.

• Economic wants are unlimited, while non economic wants are limited.

• Economic wants are not influenced by society, while non economic wants are.

Economic utility is defined as:

• Economic utility is something’s usefulness and the degree to which wants are satisfied.

• The total cost of producing a good or service.

• The amount of money spent on advertising a product.

• The number of units sold in a market.

The five types of economic utility are:

• Form, task, time, place, and possession.

• Form, Time, Place, Ownership, Service

• Form, Time, Place, Exchange, Value

• Form, Time, Place, Money, Labor

Inflation is:

• a general increase in prices and fall in the purchasing value of money.

• a decrease in the overall price level.

• an increase in the value of money over time.

• a situation where goods become free of cost.