Component #1: Terms
Scarcity-The basic economic problem that arises because people have unlimited wants but resources are limited. Americans in recent years had to cut back on lavish goods because of the scarcity of money.
Economics- The science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind. Economics involves many issues in the economy of the country and world, from politics to money.
Efficiency-A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. Economic efficiency can be used in microeconomics when discussing product.
Equity- The property of distributing economic prosperity fairly among the members of society. If the rich contribute more in taxes, there would be a bigger distribution of equity.
Opportunity Cost- The money or other benefits lost when pursuing a particular course of action instead of a mutually-exclusive alternative. Our companies 3rd quarter opportunity costs were extensive and will take awhile to recover.
Incentive-A cost or benefit that motivates a decision or action by consumers, businesses, or other participants in the economy. The incentive for a new CEO turned out to be quite beneficial.
Productivity-A measure relating a quantity or quality of output to the inputs required to produce it. If productivity continues to fall, our profits will soon follow.
Inflation-The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. The current low interest rates for bank loans risks inflation of the dollar.
Business Cycle- A cycle or series of cycles of economic expansion and contraction. The current business cycle is bad, leading the CEO to make a few cutbacks
Microeconomics-The part of economics about single factors and the effects of individual decisions. Microeconomics can be applied in budgets, businesses, politics, and finances to determine trends of individual consumers.
Macroeconomics-The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity. When seen on a macroeconomic point of view, high productivity can boost, rather than reduce, economic growth.
Demand-An economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. As Apple moves forward in revolutionizing electronics, the demand for their products rises.
Supply-A fundamental economic concept that describes the total amount of a specific good or service that is available to consumers. The high supply of oil was beneficial to the economy due to the sudden decrease of foreign oil imports.
Component #2: Problems
1) Describe some trade-offs faced by each of the following:
a) A family deciding whether to buy a new car.
A family that is deciding to buy a car might have to face, depending on the expense of the car and financial status of the family, major cut backs on money to afford it. These cutbacks might affect unnecessary things like: dining out, doing expensive activities, vacations, etc. This all deals with scarcity; the family wants a new car, but might not have the financial means to do so.
b) A member of Congress deciding how much to spend on national parks. A member of congress deciding how much to spend on national parks has plenty of trade offs. The funding of the park is determined by many things including incentives, demand, and opportunity cost. If congress were to fund national parks more they may have to cut funding to other causes, but if they cut funding to the parks, then the money gained could go into a better cause.
c) A company president deciding whether to open a new factory. If a company president were to open a new factory, the demand for that companies product would have...
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