Economic Models
Economy – all activity that affects ____________,_______________, and ______ of goods & services.
What do economists use to study the economy?_____________________________
What do economics study to predict the future?_____________________________
Based on ______________.
Businesses & governments make decisions based on these models.
Economic Principles
__________ = Study of how ___________ are made when __________ are limited.
Scarcity – Not enough_______, _____, and______ to satisfy every desire. Faces individuals, businesses, and
countries.
What 3 questions must economics answer when dealing with production?
What is the fundamental economic problem?_________________________________!!
Because of scarcity we must answer 3 questions in economics –
________ to produce?
________ to produce?
________to produce for?
Goods and Services
Good =
Service =
Needs and wants
Need =
Examples of needs –
_____= anything including and beyond needs.
Examples of wants –
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Factors of Production
List the 4 factors of production
1 Capital
What are capital goods?
2 Land and Natural Resources
All land used for the business
________________ are things that come from the earth such as water and minerals.
All ___________ is considered a natural resource.
What are some examples of natural resources?
3 Labor
Hired workers to help in production.
Labor earns _________, which they use to buy other goods and services.
Division of Labor =
4 Entrepreneurship
Entrepreneurs are people willing to _______ ________ in business.
Plan and supervise production.
Decision makers.
Your shoes
2
iPod
Dominos pepperoni pizza
Trade-off and Opportunity
What forces people to make choices?________________________
Trade-off – Decision that must be made when ___________________ between items.
Opportunity cost – Value of the next best ____________________ that was given up when a choice was made.
Can involve ______________ or _________________.
When choosing to do something, you lose. You lose the ___________________ of doing something else.
________________ _____________________ - the combinations of goods and services that can be produced
from a fixed amount of resources.
Business Costs
Fixed costs - _______________ is the same no matter how much is produced. Rent, car payment
Variable costs – Expenses that change with the number of items produced. Wages, raw materials.
_____________+_____________= Total cost
___________cost – extra cost of producing an additional unit of output. Ex. Cost is $1000 to make 25 ipods and
$1045 to make 26 ipods. The marginal cost of the additional unit would be??
________________________________ - economic model used to compare marginal costs and the benefits of a
decision.
Considerations for Businesses
3
______________ - measure of the amount of output produced by a given amount of inputs in a specific period of
time.
Specialization - takes place when people, businesses, regions & countries concentrate on ______ or ________
they can produce better than anyone else.
What is Human Capital?
How do businesses and employee’s benefit from human capital?
Productivity
Does productivity go up or down when more output can be produced because scarce resources are being used
efficiently? _________
What 2 things help to increase productivity? ____________________________________________________
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