Name Economics: Unit One Study Guide Unit One Standards Fundamental Economic Concepts SSEF1: The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments. a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources. b. Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship). c. List a variety of strategies for allocating scarce resources. d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices. SSEF2: The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action. a. Illustrate by means of a production possibilities curve the trade-offs between two options. b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs. SSEF3: The student will explain how specialization and voluntary exchange between buyers and sellers increase the satisfaction of both parties. a. Give examples of how individuals and businesses specialize. b. Explain that both parties gain as a result of voluntary, non-fraudulent exchange. SSEF4: The student will compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability. SSEF5: The student will describe the roles of government in a market economy. a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures. b. Give examples of government regulation and deregulation and their effects on consumers and producers. Economics Social Studies Georgia Performance Standards SSEF6: The student will explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people. a. Define productivity as the relationship of inputs to outputs. b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth. c. Give examples of how investment in education can lead to a higher standard of living. Microeconomic Concepts SSEMI1: The student will describe how households, businesses, and governments are interdependent and interact through flows of goods, services, and money. a. Illustrate by means of a circular flow diagram, the Product market; the Resource (factor) market; the real flow of goods and services between and among businesses, households, and government; and the flow of money. Word Definition Provide an Example (must be a sentence) Economics (p.3) Scarcity (p.4) Factors of Production AKA Resources (p. 4)
Land AKA Natural Resources (p.4) Capital (p.4) Physical Capital (p.4) Human Capital (p.5) Entrepreneurs (p.6) Trade-Offs (p.8) Guns or Butter (p.8) Opportunity Cost (p.9) Production Possibilities Curve (p.13) Efficiency (p.15) Underutilization (p.15) Economic System (p.23)
Economic Efficiency Economic Freedom Economic Security Economic Equity Economic Growth Standard of Living (p.26) Market Economy (p.27) Command Economy (p.27) Mixed Economy (p.27) Specialization (p.29) Factor Market (p.29) Product Market (p.30) Incentive (p.31) Self-Interest (p.31)
Competition (p.31) Private Property (p.41) Voluntary Exchange (p.53) Public Good (p.62) Public Sector (p.63) Private Sector (p.63) Market Failure (p.64) Unit One Study Questions 1. Why does scarcity exist? 2. How do you make decisions using marginal benefits and marginal cost? 3. What does a production possibilities curve show? 4. What three questions must all economic systems answer? 5. How are the four economic systems (traditional, command, market, & mixed) different?
6. Name a country that represents each economic system (command, market, mixed, & traditional). 7. What role does the government play in a market economy? 8. What are the positive and negative characteristics of a market economy? 9. How does the government provide a safety net in a mixed economy? 10. Give 3 examples of a public good? 11. If you decide to open a pizza shop, what resources will you need? List three items for the following: a. Land: b. Human Capital: c. Physical Capital: d. Labor: 12. How does education impact your future income? 13. How do you use cost benefit analysis to make a rational decision (marginal benefits/marginal costs? More Questions on the Back
Use the graph to answer the questions 14-17. 14. If you move from point A to point C, what will be the opportunity cost? 15. If you move from point D to point B, what will be the opportunity cost? 16. Which points on the PPC represents inefficiency? 17. Which point on the PPC represents an impossibility (unattainable)? Use the graph to answer questions 18-21. 18. Which numbers represent a worker providing labor to an employer? 19. Which number represents the employer paying the worker? 20. Which numbers represent a person receiving a new I-Phone from Verizon? 21. Which numbers represent a person paying for the new I-Phone?