Economics Chapter 1

• The economy is the sum total of all production, consumption, exchange, distribution, and investment decisions made by individuals and businesses within an area or society.
• Market economies rely on markets to allocate resources efficiently through competition among buyers and sellers.
• Economic systems are ways that societies organize their economies to allocate resources and produce goods and services.
• Command-based economic system involves government officials making most major economic decisions.
• Mixed economies combine elements of both market and command systems.
• A Market Economy uses the price mechanism to allocated scarce goods and recourses
• Opportunity Cost is the next best alternative forgone
• Positive Statement is based on verifiable facts and evidence.
• Normative Statements are statements that express the opinions or beliefs of a person, group or society.
• PPF is the Production Possibility Frontier
• Capital Goods are goods that are used to produce other goods or services.
• Consumer Goods are goods that are used for personal consumption, such as clothing, food, and household items.
• The fundamental Economic Problem is the problem of scarcity and the allocation of resources. We have unlimited wants but limited resources.
• Real Gross Domestic Product (GDP) measures the total value of all final goods and services produced within a country during a specific period of time.
• Inflation is an increase in prices over time due to factors like rising production costs, increased demand, and changes in supply.
• Economic growth refers to an increase in real gross domestic product (GDP).
• Poverty is defined by income levels below which individuals lack access to basic needs.
• Inequality exists when there are significant differences in wealth, income, or opportunities among different groups of people.
• The PPF is the maximum possible output of goods an economy can achieve where all resources are fully and efficiently employed.