STUDY GUIDE
Unit 1: Introduction to Economics
Unit Overview:
People, businesses, and governments must choose among limited or scarce resources.
Economics describes how people seek to satisfy their needs and wants by choosing among
many alternatives.
Key Concepts:
 Economics is the study of how people seek to satisfy
their needs and wants by making choices.
 Due to scarcity, all human decisions involve tradeoffs and opportunity costs.
 Production possibilities graphs can help us examine
the trade-offs from our decision making.
 All societies mush answer three key economic
questions about the production and consumption of
goods/services. How a society answers these
questions depends on how much it values different
economic goals.
 Markets exist so that people can exchange what they
have for what they need/want.
 Societies have developed different economic
systems to answer the three key economic
questions.
Essential Questions:
1. Why can’t you always get what you
want?
2. How can production possibilities graphs
help us decide which goods/services
should be produced?
3. Who or what decides what you get?
Key Vocabulary:
economics
economic system
needs/wants
goods/services
scarcity
factors of production (inputs)
land/labor/capital
physical capital/human capital
entrepreneurship
trade-off
opportunity cost
thinking at the margin
production possibilities frontier
efficiency
underutilization
Law of Increasing Costs
market economy
planned (command) economy
mixed economy
traditional economy
standard of living
safety net
specialization
households/firms
profit
self-interest
incentive
competition
Invisible Hand
consumer sovereignty
laissez-faire
free enterprise
private sector/public sector
externality