Economics
Unit 1 Notes – Fundamental Econ Concepts
Name_________________________________
Date___________________ Per.___________
1.1 – SCARCITY AND THE SCIENCE OF ECONOMICS
1.2 – BASIC ECONOMIC CONCEPTS
THE FUNDAMENTAL ECONOMIC PROBLEM
GOODS, SERVICES, AND CONSUMERS
What is scarcity?
Goods
Economic products are goods and services that are
_____________, _______________________,
and ___________________________ to others.
A good is a ____________________ commodity.
Is the problem of scarcity caused by a shortage of
money? _____. Scarcity is not caused by a _____
of money, but by a lack of _________________
needed to make all the things people want.
_______________________ goods last three
years or more when used on a regular basis.
_______________________ goods last less than
three years when used on a regular basis.
Needs and Wants
A need is a ____________________________
for ____________________.
Services
Work that is _____________ for ____________.
A want is a means of _____________________.
Consumers
______________ who ___________________
and ______________ to satisfy wants and needs.
THREE BASIC QUESTIONS
Society must make decisions about the ways its
_____________________ are going to be used.
_______________ is the process of using up goods
and services in order to satisfy wants and needs.
1. __________________________________
2. __________________________________
3. __________________________________
__________________________________ is the
use of a good or service to impress others.
THE FACTORS OF PRODUCTION
THE CIRCULAR FLOW OF ECONOMIC ACTIVITY
Land
“__________________________” or natural
resources not created by human effort.
Why do economists tend to think of land as being fixed
(or in limited supply)?
What is a market?
Factor Markets
____________________________ are markets
where productive resources are bought and sold.
Capital
The ______, _______________, and _________
used in the production of goods and services.
_________________________ is the money used
to buy the tools and equipment used in production.
Households receive ____________ from businesses
in factor markets. Businesses receive ___________
from households in factor markets.
Labor
People with all their ______________________,
_________________, and _______________.
Product Markets
____________________________ are markets
where producers offer goods and services for sale.
Entrepreneurs (________________________)
People that ____________________________ or
____________________________ to the market.
An entrepreneur’s initiative combines the resources of
_______, ______________, and ____________
into new products.
Households buy __________________________
from businesses in product markets. Businesses
_______________________________ from
households in product markets.
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1.3 – ECONOMIC CHOICES AND DECISION MAKING
2.1 – ECONOMIC SYSTEMS
TRADE-OFFS AND OPPORTUNITY COST
All societies must have an ___________________
(or economic system).
Trade-Offs
Everyone faces trade-offs, or _______________
__________________ when spending their
_____________ or _____________.
What is an economy?
It’s an organized way of providing for the
__________ and _____________ of their people.
All trade-offs result in some form of _____________
_________.
Three major kinds of economic systems:
1) _______________________________
2) _______________________________
3) _______________________________
Opportunity Cost
The cost of the next best alternative use of _______,
___________, or ____________________ when
one choice is made rather than another.
TRADITIONAL ECONOMIES
The allocation of scarce resources and all other activity
stems from _______________, _____________,
or _________________.
Opportunity cost is the result of a ______________.
PRODUCTION POSSIBILITIES
The production possibilities frontier is a __________
representing various combinations of ____________
and/or ________________ an economy can
_______________________ when all productive
________________ are __________________.
COMMAND ECONOMIES
The __________________________________
(a.k.a. government) makes most of the WHAT, HOW,
and FOR WHOM decisions.
MARKET ECONOMIES
People and firms act in their __________________
to answer the WHAT, HOW, AND FOR WHOM
questions. They act with no government involvement.
A pure market economy offers the most choices
because there is no government involvement.
2.3 – CAPITALISM AND ECONOMIC FREEDOM
What is capitalism?
A system in which _________________________
the ___________________________________.
Capitalism thrives on _____________________ the struggle among sellers to attract consumers while
lowering costs.
This diagram is used to illustrate:
1) ___________________________________
___________________________________
In a _________________________ economy,
competition is allowed to flourish with a minimum of
governmental interference.
2) ___________________________________
3) ___________________________________
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3.1 – BUSINESS ORGANIZATIONS
Corporate Structure
After an investor purchases stock, he or she becomes
an ____________ and has certain ownership rights.
SOLE PROPRIETORSHIP
A business ___________ and _______________
by one person. They are the most _____________
of all business organizations. They are the
_________________ in size.
Common stock represents _________________
ownership of a corporation.
Explain?
Forming a Sole Proprietorship
Most sole proprietorships open for business
_____________________________________.
Sole proprietorships represent many ____________
types of businesses.
Preferred stock represents _________________
ownership of the corporation.
Explain?
PARTNERSHIPS
A partnership is a business ___________________
by two or more persons.
What is the Security and Exchange Commission (SEC)?
Types of Partnerships
General partnership – all partners are responsible for
the __________________ and ______________
obligations of the business.
3.2 – BUSINESS GROWTH AND EXPANSION
Limited partnership – at least one person is ______
____________________ in the daily running of
the business.
GROWTH THROUGH MERGERS
A _____________________ is when two or more
businesses form a single firm.
Forming a Partnership
Articles of Partnership – legal papers that state ahead
of time how the _____________________ and
____________ will be divided.
Reasons for Merging
1) __________________________________
2) __________________________________
3) __________________________________
CORPORATIONS
A corporation is a form of business organization
recognized by law as a separate legal entity having all
the rights of an ______________________.
Types of Mergers
Horizontal Merger - occurs when two or more firms
that produce the ______________________ of
products join force.
Forming a Corporation
If you would like to _______________________,
or form a corporation, you must file for permission
from the national government or state where the
business will have its headquarters.
Vertical Merger - occurs when firms involved in
_________________ steps of _______________
or _________________________ come together.
What is a charter?
Conglomerates
Firms that have at least _______ businesses, each
making ___________________ products, and none
of which is responsible for a _________________
of its sales. Allows for _____________________.
The charter specifies the number of shares of
______________, or ownership parts of the firm.
Multinationals
A multinational is a ______________________
that has manufacturing or service operations in a
number of ______________________________.
The shares are sold to investors called
_________________ or __________________.
If the corporation is profitable, it may issue a
_____________________ to each stockholder.
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3.3 – OTHER ORGANIZATIONS
COMMUNITY AND CIVIC ORGANIZATIONS
Nonprofit organizations do not seek financial gain for
their members. Give 3 examples.
1) _______________________________
2) _______________________________
3) _______________________________
COOPERATIVES
A cooperative is a _________________________
association of people formed to carry on some kind of
economic activity that will ____________________
its members.
Consumer Cooperative
Buy _________ goods on behalf of its members in
order to offer these goods to the members at a
_________________ price.
Service Cooperative
Deals with ________________ rather than
______________. A credit union is an example
(employees from a particular company or government
agency).
Producer Cooperative
Helps members sell their ___________________.
LABOR, PROFESSIONAL, AND BUSINESS
ORGANIZATIONS
Labor Union
A labor union is an _____________________
formed to work for its members’ interests in various
employment matters. Labor union representatives
______________________ with management.
_______________________________ refers to
the negotiations between representatives of labor and
management.
Professional Associations
A group of people in a _____________________
occupation that works to improve working conditions.
Some professional associations ________________
members to join; others have _________________
membership.
Business Associations
Chamber of commerce – promotes the welfare of its
________________ and the _______________.
Better Business Bureau – nonprofit organization that
provides ____________________________ on
companies.
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