Chapter+1+HW

__**Chapter 1.1 Notes**__ __**Key Terms**__ Need : something like air, food, or shelter that is necessary for survival Want : item we desire but is not essential to survival Economics : study of how people seek to satisfy their needs and wants by making choices Goods : physical objects (shoes and shirts) Services : actions or activities that one person performs for another Scarcity : limited qualities of resources to meet unlimited wants Shortage : when producers will not or cannot offer goods or services at the current prices Factors of Production : land, labor, and capital Land : all natural resources used to produce goods and services Labor : effort that a person devotes to a task for which that person is paid Capital : any human-made resources that is used to produce other goods and services Physical Capital : human-made objects used to create other goods and services Human Capital : knowledge and skills a worker gains through education and experience Entrepreneurs : ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and service

__**Scarcity and Choice**__ - study of economics begins with the idea that people can't have everything they need and want - deciding what to do with your time is an example of looking at the world economically - scarcity is the reason people and businesses have to make these choices

__**Scarcity**__ - for many Americans the idea of scarcity is hard to understand because they live in a wealthy country (having access to countless services) **Defining Scarcity** - no one can have a endless supply of everything - a limit is always reached **Scarcity Versus Shortages** - shortages can be temporary or long-term - wars and droughts can create shortages - scarcity always exists because our needs and wants are always greater than our resource supply

__**Land**__ - land is used for all natural resources used to produce goods and services - natural resources are materials found in nature

__**Labor**__ - effort a person devotes to a task for which a person is paid - includes medical aid provided by a doctor and tightening of a clamp by an assembly line worker

__**Capital**__ - human-made resource that's used to produce other goods **Physical Capital** - human-made objects used to create other goods and services - includes buildings and tools - saves time and money making people more productive **Human Capital** - people invest in themselves with education and experience

__**Entrepreneurs**__ - ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services - individuals that take risks to develop original ideas

__**Scarce Resources**__ - all goods and services are scarce because the land, labor, and capital used to create them is scarce

__**1.1 Questions**__ 1. What is the difference between a good and a service? - goods are physical objects such as shoes and shirts - services are actions or activities that one person performs for another 2. Why ia the idea of scarcity a starting point for thinking economicallly? - there is no endeless supply for everything and sooner or later the limit is reached 3. How is scarcity different from shortages? - scarcity is a limited quantity of resources - shortage is when produces will not and cannot offer goods and services, can last long periods of time 4. Describe the three factors of production. - land, labor, and capital 5. What special advantages does physical capital offer? - extra time, more knowledge, and more productivity 6. What rule do entrepreneurs play in the economy? - they fuel economic growth because they take risks to develop original ideas, start businesses, and create new industries 7. Why might an economist look at hundreds of cars moving along an assembly line and say, "There is an example of scarcity"? - there isn't an unlimited amount of the cars, creating scarcity 8. Which factor of production is represented by each of the following? a) an office building - physical capital b) an assembly line worker - labor c) a tree used to make paper - land d) unused soil - land e) an artist - entrepreneur f) a student - human capital 9. If I decided to start an economics tutoring business I would need a class room or room as the land, students and myself as the labor, and class room materials as the capital 10. Do you agree or disagree with the following statement? Creating capital is like depositing money in a savings account. You save now in order to have more in the future. - agree

__**Chapter 1.2 Notes**__ __**Key Terms**__ Trade-off : all the alternatives that we give up whenever we choose one course of action over another Guns or Butter : a phrase that refers to the trade-off that nations face when choosing whether to produce more or less military or consumer goods Opportunity Cost : the most desirable alternative given up as the result of a decision Thinking At the Margin : when you decide how much more of less to do

__**Trade-Offs**__ - all individuals make decisions that involve trade-offs **Individuals and Trade-Offs** -all decisions involve trade-offs - choosing one thing will deprive you of doing something else **Businesses and Trade-Offs** - decisions of how to use land, labor, and capital resources create trade-offs **Society and Trade-Offs** - guns or butter is an example of trade-offs countries have

__**Defining Opportunity Cost**__ - trade-offs are faced when making a decision - the most desirable alternative given up a the result of a decision is called the opportunity cost - your decision depended on the specific opportunity cost depends on whatever you were willing to sacrafice - determine whether you are willing to accept the opportunity cost of a choice you are about to make
 * Using a Decision-Making Grid **

__**Thinking at the Margin**__ - decide how much more or less to do - "all or nothing" - compare opportunity cost and benefits - thinking at the margin is just like making any other decisions - compare the sacrafice and what you will gain
 * Making a Decision at the Margin **
 * Cost and Benefit at the Margin **

__**1.2 Questions**__ 1. Present three examples that illustrate how all decisions involve trade-offs. - business, individuals, and society 2. Why must the opportunity cost of a decision always be something desirable? - usually it's the one out of the other alternatives that is desirable 3. How do economists use the phrase "gun or butter"? - a country that decides to produce more military goods ("guns") has fewer resources to devote the consumer goods ("butter") and vice versa 4. What does it mean to "think at the margin"? - when you decide how much more or less to does 5. Suppose that you can save $50 by buying your car in a different city. If the trip requires only $10 in gasoline, is the trip worthwhile? Why or why not? - yes it is worth while, because you still save $40, but also it's not a lot of saving 6. Determine an opportunity cost for each of the following. a) eating pizza - eating a salad b) going to see a movie on Tuesday - studying for the test c) going to see a movie on Saturday - saving you money d) watching television - sleeping 7. Grid 8. Decide whether to work 2, 4, or 6 hours at an after-school job by comparing the opportunity cost and benefit of each alternative. 9. Which factors would an employer consider is he or she were trying to decide whether to hire an additional worker? - firing another one

__**Chapter 1.3 Notes**__ __**Key Terms**__ Production Possibilities Curve : graph; shows alternative ways to use an economy's productive resources Production Possibilities Frontier : line on a production possibilities graph that shows the maximum possible output for a specific economy Efficiency : using resources in such a way as to maximize the production or output of goods and services Underutilization : using fewer resources than the economy is capable of using Cost : the alternative we give up when we choose one option over the other Law of Increasing Costs : as a production switches from one item to another more an more resources are necessary to increase production of the second item

__**Production Possibilities**__ - graphs are used to analyze the choices and trade-offs people make - also see how one value relates to another **Drawing a Production Possibilities Curve** - decide which goods or services to examine

__**Efficiency, Growth, and Cost**__ - production possibilities graphs can show how efficient an economy is, whether an economy has grown or shrunk, and the opportunity cost of a decision to produce more of one good or service **Efficiency** - using resources in such a way as to maximize the production of goods and services - production possibilities frontier represents an economy working at it's most efficient level of production - economies can operate inefficiently **Growth** - production possibilities curve reflects the country's current production possibilities as if the country's resources were frozen in time - if quality and quantity of available land, labor, or capital change, then the curve will move - when a country's production capacity decreases, the curve shifts to the left **Cost** - not necessarily money, rather than an alternative we give up when we choose one option over the other - as we move along the curve, we trade off more and more to get less and less additional output

__**Resources and Technology**__ - economist must first determine which goods and services a country can produce before creating a production possibility curve

__**1.3 Questions**__ 1. How is underutilization depicted on a production possibilities frontier? - points inside a line 2. How does a production possibilities curve illustrate how efficient an economy is? - displays alternative ways to use an economy's productive resources 3. How does a production possibilities curve illustrate opportunity costs? - cost moves when producing increases or decreases 4. Because the number of farms has decreased since 1950 production possibilities have decreased. With less farms there's less land that could be producing things as before 5. How would you illustrate each of the following events on a production possibilities curve for factory goods and farms? a) the computer is invented - year of invention and the increase of inventing the computer throughout the years b) 1 million farm workers remain unemployed for 6 months - the start of unemployment an the increase of unemployed farm workers throughout the 6 months c) a drought - length of time with the drought 6. Describe a specific event that would make each of the following happen to a production possibilities curves a) a point moves down and to the left - selling of rain coats in the summer b) the frontier shifts to the right - people going to the beach during the summer

1. Economist define as __SCARCITY__ "limited quantities to meet unlimited wants." 2. All decisions involve because we must give up some alternatives when we choose a certain course of action. 3. The term ... refers to all natural resources that are used to produce goods and services. 4. Economists use the phrase ... to describe the trade-offs a country is forced to make when choosing between military and consumer production. 5. A(n) ... is the most important sacrifice that results from making a decision. 6. A person who starts a new business of develops an original idea is known as a(n) ... 7. ... of resources occurs when an economy uses fewer resources than it is capable of expending.
 * Chapter 1 Assessment**