Supply & Demand - Faculty.utep.edu

Capital"Capital" comprises the tools, equipment, andfactories used to produce goods and services.As the economy changes, some economists areadjusting the definition to include "tools" suchas knowledge and intellectual property. Anexample of such knowledge and intellectualproperty are databases and software.The importance of analysis is that it helps us todiscover why things work and how things happen.This, in turn, will help us deal with problems thatwe would like to solve.ExplanationEconomics is also concerned with the explanationof economic activity. After economists understandwhy and how things work, it is useful andeven necessary to communicate this knowledge toothers. If we all have a common understanding ofthe way our economy works, some economic problemswill be much easier to address or even fIX inthe future. When it comes to the GDP, you willsoon discover that economists spend much of theirtime explaining why the measure is, or is not, performingin the manner expected.PredictionFinally, economics is concerned with prediction.For example, we may want to know if people'sincomes are going to rise or fall in the future,affecting their spending habits in the marketplace.Or, perhaps a community trying to choose betweenhigher taxes on homeowners or higher taxes onbusinesses needs to know the consequences of eachalternative before it makes its choice.The study of economics can help to make thebest decision in both situations. Because economicsdeals with the study of what is, or what tends tobe, it can help predict what may happen in thefuture, as well as the likely consequences of differentcourses of action.Finally, it is also important to realize that theactual decisions about the economic choices to bemade are the responsibility of all citizens in a freeand democratic society. Therefore, the study ofeconomics helps all of us to become moreinformed citizens and better decision makers.Checking for Understanding1. Main Idea Using your notes from the graphicorganizer activity on page S, explain why asociety must face the choices about WHAT,HOW, and FOR WHOM to produce.2. Key Terms Define scarcity, economics, need,want, factors of production, land, capital,financial capital, labor, entrepreneur, production,Gross Domestic Product (GOP).3. Describe the fundamental economic problem.4. List the three basic economic questions everysociety must answer.5. Describe the factors of production.6. List the four key elements of economics.Applying Economic Concepts7. Scarcity How does sea rcity affect you r life?Provide several examples of items you had todo without because of limited resources.Explain how you adjusted to this situation.For example, were you able to substituteother items for those you could not have?~JriticalTI&'inldn8. Synthesizing Information Give an exampleof a supposedly "free" item that you seeevery day. Explain why the item is not reallyfree by stating who or what actually paysfor it.® Practice and assess key social studies skills withthe Glencoe Skillbuilder lnteractive Workbook,Level 2.10 UNIT 1 FUNDAMENTAL ECONOMIC CONCEPTS