Name: Noelia Olivero

Period: 4
Unit 1 Review Packet
Part 1: Vocabulary

Directions:
Make sure you understand and could explain each term in your own words. Write out definitions or make
flashcards for terms.

 Scarcity: the state of being service that consumers will  Profit: a financial gain.
scarce or in short supply. later use.  Self-Interest: interest in only
 Factors of Production: the  Services: a transaction in yourself and your money.
inputs needed for the which no physical goods are  Mixed Economy: an
creation of a good or a transferred from the seller economic system combining
service. to the buyer. private and public
 Capital: assets used for the  Consumers: people who buy enterprise.
production of goods and goods.  Distribution of Wealth:
services.  Producers: people who distributing your wealth.
 Labor: Work make goods.  Trade Offs: a balance
 Natural Resources:  Traditional Economy: an achieved between two
resources that exist that are economy where customs, desirable but incompatible
not man made. traditions, and beliefs features.
 Entrepreneurship: an prescribe the principles of  Opportunity Cost: the loss of
individual who creates a economic organization. potential gain from other
new business.  Command Economy: where alternatives when one
 Technology: the application a central government makes alternative is chosen.
of scientific knowledge for all the economic decisions.  Opportunity Benefit: an
practical services.  Market Economy: an advantage or profit from
 Value: the regard that economy in which supply something.
something is held to and demand drive economic  Production Possibilities: set
deserve. decisions. of points at which a
 Utility: total satisfaction  Capitalism: a countries trade countries economy is most
received from consuming a and industry are controlled efficiently allocating its
good or service. by private owners for profit, resources.
 Paradox of Value: the rather by the state.  Production Possibilities
contradiction that although  Laissez-Faire: abstention by Curve: a graph that shows
water is more useful, governments from all the different
diamonds are more money. interfering in the working of combinations of output that
 Consumer Goods: products the free market. can be produced given the
bought for consumption by  Invisible Hand: the unseen available resources.
the average consumer. forces that move the free  Circular Flow of the
 Capital Goods: physical market economy. Economy: how money
assets that a company uses  Incentives: a payment or moves through society.
in the production process to concession to stimulate  Economic Growth: the
manufacture products and better output or investment. increase of inflation.

Part 2: Q &A

Directions: Answer the following questions using COMPLETE sentences.

1. What are the THREE fundamental questions of economics?
1. what to produce

2. how to produce

3. what to produce

2. What is the biggest challenge of economics? Why does this challenge exist?
- scarcity is the biggest challenge because we all have unlimited wants and limited resources.

3. What is economics?
- the branch of knowledge concerned with the production, consumption, and transfer of wealth.

4. Who answers the three fundamental economic questions in a:

1. Traditional Economy: custom

2. Command Economy: central government

3. Market Economy: individuals

4. Mixed Economy: individuals and the government

5. Define and explain TINSTAAFL.

- there is no such thing as a free lunch, meaning that someone had to pay for it.

6. Explain the difference between a want and a need. Give an example.

- a want is something you desire but don’t necessarily need, like a diamond ring
- a need is something you need to have to live, like water

7. How does scarcity relate to value and utility? Why is it weird diamonds are worth more than water?
- in order for something to have value, it must have scarcity and utility. Its weird that diamods are more
because we actually need water to survive and not diamonds.

8. Describe the circular flow of the economy.

- it demonstrates how money moves throughout society.

9. When does economic growth occur? Why is productivity important to economic growth?
- economic growth happens when a countries production capacity increases. Increase in output can only
be due to increases in the inputs to the production process.

10. What is the formula to calculate profit? What is the formula to calculate cost? Be able to calculate both.
- total revenue – total expenses = profit
- total cost of production/quantity of units produced = cost

11. Describe the factors of production. Give a real world example of each.
 Factor of Production Description Real World Example
physical space and natural a field of grass
Land resources

workers a starbucks worker

Labor

money and equipment the government

Capital

ideas and drive a person with their own

entrepreneurship business

devices macbook air

technology

12. Why is economic freedom so important to the way capitalism functions?

- it is the most essential route to greater opportunities and good standard of living for all in any society.

13. What is the difference between capitalism and communism with private property?
- the ability for private individuals to own property.

14. What is the role of the Entrepreneur in a capitalist economy?

- creating goods and services with the hopes of gaining a profit.

15. Give an example of how incentives increase the efficiency of labor.

- taking care of your family by yourself is labor.

16. How does the profit motive and competition work together to benefit consumers?
- newer and cheaper products will reach the market.

Part 3: Matching

Directions: Write the letter of the definition/description in the 2 nd column to the term/name in the 1st.

1. Adam Smith _____i_____ a. All the G&S we could produce

2. Karl Marx _____f_____ b. Command Economy
3. Opportunity Cost _____d_____ c. Factors of Production
4. Trade Offs ____c______ d. Next best choice
5. Resources ____h______ e. Food/water, shelter, clothing
6. Necessities _____e_____ f. Father of Socialism/Communism
7. Production Possibilities _____a_____ g. Traditional Economy
8. Communism _____b_____ h. Options or Choices
9. Capitalism _____j_____ i. Father of Capitalism
10. Tribal Economy ___g_______ j. Market Economy

Part 4: Graphing

Directions: In the space provided, draw a Production Possibilities Curve (PPC) for each of the following
prompts. Label your axes with any two goods that use similar resources.
1. Efficient PPC 2. Inefficient PPC

3. Movement from Inefficient to Efficient PPC 4. Economic Growth (using a PPC)

1. At point A, what is the quantity of guns and butter are produced?

-120 guns, 25 butter

2. What is the opportunity cost if we want to increase production of butter from 25

units to 50 units?
- 40 guns

What is the opportunity benefit?

- 25 butter

3. What do we give up if we want to produce 100 units of butter?

- Point A to point C: 80 guns, point B to point C: 40 guns

4. Can we produce at point D? If not, what would we need to produce more at

point D?
- No, we need more resources and technology.

5. What is wrong with producing at point E? Inefficient

 6. Identify several trade offs for the use
of you time after school. Fill in the table
below to demonstrate the
opportunity cost of each decision.
Action Opportunity Cost How will this
affect your family?

A
D
120

Guns 80

C 40
E

25 50 100

Butter

1. At point A, what is the quantity of guns and butter are produced?

2. What is the opportunity cost if we want to increase production of butter from 25 units to 50 units?
What is the opportunity benefit?

3. What do we give up if we want to produce 100 units of butter?

4. Can we produce at point D? If not, what would we need to produce more at point D?

5. What is wrong with producing at point E?

6. Identify several trade offs for the use of you time after school. Fill in the table below to demonstrate the
opportunity cost of each decision.

Action Opportunity Cost How will this affect your family?