Unit 1 – The Foundation
of Economics
Review for
the Quiz
Adam Smith talked about
the “invisible hand of the
market place”, meaning?
Adam Smith talked about
the “invisible hand of the
market place”, meaning?
The idea that selfinterest and competition
work together to
regulate the market
place.
What is Economics?
What is Economics?
The study of how we
satisfy our unlimited
wants with our limited
resources.
What is a market?
What is a market?
Any arrangement, formal
or informal, that allows
to exchange things.
What are the key
economic questions?
What are the key
economic questions?
What will an economy
create, how will they
combine the factors of
production and who will
get to consume these
goods and services.
What is it that gives us
the ability to be one of
those guys who can
make a wet concrete
driveway really smooth.
What is it that gives us
the ability to be one of
those guys who can
make a wet concrete
driveway really smooth.
Specialization
This is where you can
purchase or rent land
and workers, pay wages
for work done, get your
well-deserved profits.
This is where you can
purchase or rent land
and workers, pay wages
for work done, get your
well-deserved profits.
Factor Market
What are the benefits to
a free market system?
What are the benefits to
a free market system?
Freedom – we can make
our own choices, more
efficient – price & supply
take care of itself
through competition, and
something else, I think.
Why do economists use
graphs?
Why do economists use
graphs?
They help us to see how
different values relate to
other values, plus helps
clarify a difficult issue at
times.
This is the area where
households buy the
goods and services that
business firms produce.
This is the area where
households buy the
goods and services that
business firms produce.
Product Market
What is innovation?
What is innovation?
It is the process of
bringing new methods or
products into use.
What does laissez faire
mean?
What does laissez faire
mean?
It’s French for “allow
them to do”, which
means business should
be able to function with
as little government
intervention as possible.
What is profit?
What is profit?
It’s the amount of money
a business receives in
excess of expenses – the
reward for taking the risk
of starting a business.
Why do centrally planned
economies fail?
Why do centrally planned
economies fail?
Government running the
show isn’t as efficient, there
is a lack of freedom (people
get killed – as in really dead),
there is a lack of innovation,
the supposed economic
equality is a farce, and there
are those who are more
equal than others.
What is the structure of
methods and principles
that a society uses to
produce and distribute
goods & services called?
What is the structure of
methods and principles
that a society uses to
produce and distribute
goods & services called?
And Economic System.
What is the difference
between socialism and
communism?
What is the difference
between socialism and
communism?
We vote the socialists in to
redistribute our stuff,
communists kick the door
in, shoot people and then
redistribute out stuff.
Your desire to sell your
old bicycle on Craig’s list
for a set price, and not
take a nickel less, is
based on this concept.
Your desire to sell your
old bicycle on Craig’s list
for a set price, and not
take a nickel less, is
based on this concept.
Self-Interest
What is a mixed
economy?
What is a mixed
economy?
A market based economic
system where the
government is involved to
some extent. There is no
purely socialist or purely
communist society, it’s all
a mixed bag.
What does Standard of
Living mean?
What does Standard of
Living mean?
Is the level of a country’s
economic prosperity
What is private property?
What is private property?
When the property is
owned by individuals or
companies, not by the
government. You own your
home and can paint it
green with purple stripes, if
you want, but you can’t
have meth lab in your
basement.
Scarcity vs. Shortage?
Scarcity vs. Shortage?
Scarcity exists in nature,
we are limited by what
exists on Earth, but
shortage is a result of poor
planning, weather – a
temporary condition where
we have fewer goods to
choose from.
What is Economic
Transition
What is Economic
Transition
The idea that there is a
period of change in which a
nation moves from one
economic system to
another… change happens all
the time in all economies, we
move toward socialism,
China moves toward
Capitalism
Is America a free market
economy?
Is America a free market
economy?
Sort of, but not really. We
are capitalist with free
aspects, but the
government does get
involved in our economy
through Social Security,
heath care, regulations…
In our economy, why do
some people become
teachers, and others
doctors?
In our economy, why do
some people become
teachers, and others
doctors?
Freedom of choice, free
to enter into a contract
or pathway of your own
choosing.
This is any situation that
allows buyers and sellers
to exchange goods and
services.
This is any situation that
allows buyers and sellers
to exchange goods and
services.
A market
The ability for me to be
able to buy my house is
based on this, and the
people who get to drive a
Porsche get to drive one
base on this as well.
The ability for me to be
able to buy my house is
based on this, and the
people who get to drive a
Porsche get to drive one
base on this as well.
Price
And That’s it,
I think