Question: What is the “fundamental economic problem” that exists in every economy?

Answer: Scarcity- satisfying unlimited wants with limited resources. Forces people to make choices.

Question: Scarcity

Answer: Insufficiency of resources to satisfy people’s unlimited wants

Question: Economics

Answer: How people work to transform resources into goods and services to distribute and satisfy wants

Question: Difference between Macro and Micro economics

Answer: Micro- study of individuals or specific firms or industries

Macro- study of the economy as a whole

Question: What economic model depicts the flow of money, goods, and services between households and firms?

Answer: Circular Flow Model

Question: Opportunity Cost

Answer: quantity of goods that must be given up to obtain another good

Question: PPC - what is looks like and be able to determine opportunity cost and graph it

Answer: One good v another good

(look on study guide)

Question: What shifts the PPC curve outward and inward

Answer: Inward- capital goods destroyed (natural disasters or war)

Outward- Innovations, new resources, new technology

Question: Absolute v Comparative Advantage

Answer: Absolute- who can produce more of a good with fewer resources

Comparative- who can produce more of a good at a lower opportunity cost

Question: Factors of Production

Answer: Land

Labor

Capital

Entrepreneurship