Lynch Economics Unit 1

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The study of people choices trying to satisfy their wants in a world
Economics
of scarcity
means (unlimited wants vs limited resources) is the basic funda-
Scarcity
mental issue of economics.
means "There is no such thing as a free lunch" basically in
economics even things that are "Free" aren't really. There are
TINSTAAFL
always opportunity costs and sometimes even Hidden Costs or
Unintended Effects
This is the second best choice (ONLY).
Opportunity Cost
EVERY choice has one of these. There is ALWAYS one of these
(Also called Resources) There are four
Factors of Production
Land + Labor + Capital + Entrepreneurship
Land This Resource/Factor of Production is basically natural resources
This Resource/Factor of Production is basically man made tools
Capital
or money used to make something else like tractors or factories
This Resource/Factor of Production is time & energy of working
Labor
people (you get paid wages for this)
This Resource/Factor of Production is the idea & creating the idea.
This is taking the other resources and mixing them together in
Entrepreneurship
the perfect way to create some desired (often new) product that
people want (and will pay for)
This is where new businesses (and jobs) and new products (and
Entrepreneuship's Creations
inventions) are created.
Entrepreneur's Effect on a Country This leads to a Country's Economic Growth
This business organization is what it says it is. You are the sole
Sole Proprietorship owner. You are 100% personally responsible for the business's
losses but also get 100% of business's profits.
This business organization is 2 (or more) partners with varying
%'s in the company. Generally this is what people were trying to
Partnership
form in sharks videos. Basically the same as #1 but you are only
responsible for your %
This business organization is a company that is legally separate
from people. It is owned through stock. The stock holders can
Corporation vote and control the company. The advantage here is that you are
only able to lose the $ in your stock rather than your house. The
disadvantage is you pay more taxes
Value is a combination of UTILITY and SCARCITY (Rarity)
Utility Usefullness of something or the happiness something brings you
Scarcity (Rarity) The rarity of an object
Items of value Goods (Item) or Services (tasks done by people for others)
is that extremely rare luxury items (say a Diamond) can be worth
Paradox of Value
more than a common necessity (Air, Water) that you need to live.
are objects sold can be it durable (lasting) non-durable (short
Goods
lastign) consumer (for consumers)
Services work by people done for other people.
An image where resources are used in the factors market &
Circular Flow of Economic Activity.
creations are made in the producton market
is where resources to make things of value. ((IE this is where you
Factors Market
WORK, and get paid wages for your labor)
This is where resources become items of value. ((IE where busi-
Products Market
ness's sell things to people))

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 Lynch Economics Unit 1
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This is how a country answers the 3 basic economics questions.
1) What to produce
Economic System
2) How to produce it a
3) For whom to produce it. (who gets it)
This is the ancient economic system,
Traditional System the world is moving away from Traditional. You do a job, because
your family always has.
places like Amish, or Inuit Indians, or Aborigines, or other 3rd
Examples of Traditional Economies
world places where Traditional is still used.
These are all words that mean the same system. It is where
Market Economy AKA Free Enterprise AKA Capitalism PEOPLE/INDIVIDUALS are "Mostly" in charge and "Mostly" make
the choices
These are all words that mean the same system. It is where the
Command Economy AKA Socialism
government is "Mostly" in charge and "Mostly" make the choices
This is an economic system that evenly mixes Socialism and Free
Mixed Economy
Enterprise
No country is 100% socialist or free enterprise. So technically
everything is mixed. BUT countries that are mostly free enterprise,
Limits of Systems
are the countries we call free enterprise (like USA) while the
countries that are mostly socialist (like china) arecalled socialist
America England, Canada, Japan, Germany, (most of Western
Examples of Free Enterpise Countries
Europe)
China Cuba, North Korea (Countries that are Communist tend to
Examples of Socialist Countries
be this)
US Programs like Minimum Wage because it restricts what a
Examples of the little bit of US Socialism business would pay. Welfare is as well because it helps ONLY the
poor instead of everyone
Even in a mostly Free Enterprise country the US Gov't provides
American Government Role in economy public goods (like roads) and services (military, police, protection)
that no one else would.
Names of American Goverment Roles "Protector", "Provider" "Regulator" & "Consumer"
Economic Freedom
Voluntary Exchange
5 Features of Free Enterprise Private Property
Incentive/Profit motive
Competition
This feature of free enterprise means:
Economic Freedom you can buy and sell what you want, and have freedom to do what
you want for job/business
This feature of free enterprise means:
Voluntary Exchange you can exchange something to make you happier. ((money is one
side of the exchange)
This feature of free enterprise means:
Private Property: You are allowed to own your own stuff and motivated to try and get
more stuff.
This feature of free enterprise means:
Incentive/Profit motive
you can try to make money either as a business or individual
This feature of free enterprise means:
Competition you are allowed to compete for business & jobs and if you are
better, you win.
These are common sense ideas like
Economic Efficiency
American Economic Goals Economic Equity/Fairness*
Economic Security
Full Employment (Jobs)*
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 Lynch Economics Unit 1
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Price Stability
Economic Growth*

* are the most important

Economic Growth country's total output of Goods and services grows over time.
Increasing Productivity (making 200 cars an hour beats making
100)
Economic Growth Causes
Increasing Human Capital
things like Division of Labor, Specialization, (basically an assem-
Increasing productivity
bly line)
things like peoples skills, health, abilities, knowledge, and motiva-
Increasing Human Capital
tion. You can increase these through training and education.
The Production Possibility Graph. When the whole production
Economic Growth Model possibility graph expands outward (gets bigger) that equals
growth!
graph that shows what a country could produce. Because of
opportunity cost, as you make more of one product, you make
Production Possibility Graph
less of another. This looks like a curve on a standard Graph (XY
like math class) starting in upper left curving to lower right
Fits: fairness goal to the USA by making sure every job pays at
least a basic amount.
Is Against: goals of Full Employment because businesses hire
Minimum Wage and how it related to US Economic Goals
less when they are forced to pay more. Economic Freedom be-
cause you are telling people and businesses that they can't pay
less even if the job is worth less.

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