1. EOC PREP By: Tasha Drain Fundamental Review

2. Economics Economics is the study of how individuals, businesses/firms, and nations can best allocate their limited resources. Resources are defined as those things whech humans can put to productive use. Ex. Time, money, information, machines Factors of Production- Land- natural resources Labor-human workers Capital- Machines, Structures and equiptment Entrepreneurship-creative, managerial and risk-takers

3. Scarcity Scarcity is the lack of adequate resources… There is never enough… Unlimited Wants for limited resources Strategies for dealing with Scarcity Higher Prices Price Ceilings & Price Floors Rationing

4. Opportunity Cost Tradeoff- the act of giving up one thing of value to gain another thing of value. Opportunity cost- the value of the option that is lost… what opportunity you have foregone Marginal benefit- benefit receives once the cost of their decision is considered. Marginal cost- the cost of the decision once weighted against the benefits. When making a decision the marginal benefit must be greater than the marginal cost= rational decision!

5. Production Possibilities Curve

10. Specialization Specialization is the devotion of labor to a specific task. Division of labor is the act of splitting up work into smaller more specialized tasks to increase productivity. The United States economy is based on voluntary exchange. People freely choose to exchange goods, services, and resources.

11. 3 Types of Economic Systems Command economy- the government owns the property and means of production. Market economy- producers and consumers determine what gets made and for whom. Mixed Market economy- some combination of command and market. 3 economic question every nation must answer are… what gets produced, how is it produced and who will benefit from it… In a command economy the government answers these questions, in a market economy producers and consumers answer them.

12. 6 social goals of every society Equity- property is equally distributed among the citizens (at least in theory) Profit motive- the incentive to work hard In a market economy the government interferes very little only getting involved when there is a market failure (ex. Bailing out GM when they were bankrupt)

13. Market Economy Governments in a market economy regulate by imposing tariffs, subsidies, actions by the Federal Reserve, environmental regulations, workplace safety guidelines, and consumer protection laws. Property rights- the government passes laws and enforces regulations to protect property rights. Regulation- to control Deregulation- to stop or decrease its control Productivity- ratio of inputs to outputs Input- all the factors of production that go into producing a good Output- simply the amount of a good produced Investment in human capital- any training that will increase output