Midterm 1- Chapters 1-2

Midterm 1- Chapters 1-2 - Chapters 1-2 Chapter name Ten...

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Chapter name Chapters 1-2 1. Ten Principles of Economics 1. Thinking Like an Economist
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Chapters 1-2 Study Checklist: Required reading : Chapter 1: pages 3-14, 17-18 Chapter 2: pages 21-26, 29-38 Chapter 2 Appendix: pages 40-48 Online practice quiz questions : Chapter 1: #1, 2, 4, 5, 6, 7
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Introduction to Economics: Economics is about making choices. A household and an economy face many decisions: Who will work? What goods & services and how many of them should be produced? What resources should be used in production? At what price should the goods & services be sold? 33
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The Economic Problem: Would you like to have a nicer house or car? Would you like more money, leisure, or sleep? Our wants and desires are virtually unlimited, but the resources available to satisfy these wants are scarce. The management of society’s resources 44
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Society and Scarce Resources: When is a good scarce in society? - Question: If there was only 1 diamond left in the world, would it be a scarce good? Answer: if, and only if: quantity demanded> quantity supplied at a price of zero 55
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Society and Scarce Resources: Question: What percentage of economies in the world face scarcity? Answer: 100% Every person and every country faces some sort, or some level, of scarcity. Resources are scarce Time is scarce – time is the ultimate constraint There are only 24 hours in a day Bill Gates’ time is probably scarce h
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Society and Scarce Resources: Economics: The study of how people use their scarce resources to satisfy their unlimited wants. The Economic Problem is scarcity (this will likely be an exam question) Resources: The factors of production, or inputs, used 77
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Factors of Production – 3 main ones: Inputs used to produce goods and services (G/S) 1. Land (natural resources)- rents Water, land, minerals, trees, etc 2. Labor- wages Physical and mental services of people 3. Capital- interest 88
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Factors of Production – 2 more: 4. Entrepreneurship- entrepreneurial ability- profit The innovator or inventor – “innovate or stagnate” Thinks up product and makes decisions needed to make it. Assumes the risk of profit or losses. The entrepreneur is the residual claimant. He/ she benefits from what’s left over after paying for other resources. 5. Technology 99
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Goods and Services (G/S): Good: A tangible product used to satisfy human wants. Ex) food, books, cars, chairs, clothes, computers Service: An activity, or intangible product, used to satisfy human wants. Ex) lectures, movies, phone service, Internet, haircuts 1010
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Markets: Market: A set of arrangements by which buyers and sellers carry out exchanges at mutually agreeable terms.
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