Pre-AP Economics Chapters 1 – 3 STUDY GUIDE Chapter 1 1. 2. 3. 4. 5. 6. 7. Know the difference between a need and a want. What is the fundamental economic problem? Define and explain all the factors of production. What is value and utility? Be able to define and explain the concept of wealth. What is a market? Be able to recognize and explain the Circular Flow of Economic Activity. How are trade-offs and opportunity cost related? Be able to define and explain both concepts. Chapter 2 8. What is the definition of an economic system? Please explain the concept. 9. Be able to define and explain the different economic systems, their advantages and disadvantages. 10. Define and explain capitalism and free enterprise. 11. Define and explain voluntary exchange and private property rights. 12. What is the definition for profit motive and competition? Chapter 3 13. Know the three different forms of business organization, their advantages and disadvantages. 14. What is a merger? 15. Be able to describe and recognize an income statement. What is net income, depreciation and cash flow? 16. What is a non-profit organization?