Study Guide: Essentials of Economics (Pages 27-50)
Chapter 2: The U.S. Economy
1.​ What America Produces
○​ How Much Output: Overview of U.S. economic output and growth over time.
○​ Mix of Output: Composition of goods and services produced in the economy.
○​ Changing Industry Structure: Shifts in economic focus, such as from
manufacturing to services.
2.​ How America Produces
○​ Factors of Production: Land, labor, capital, and entrepreneurship.
○​ The Private Sector: Different types of business organizations (e.g., sole
proprietorships, partnerships, corporations).
○​ Government’s Role: Regulatory framework, public services, and economic
interventions.
3.​ For Whom America Produces
○​ Distribution of Income: Economic inequality, income shares, and trends.
○​ Income Mobility: Opportunities for changing economic status.
○​ Government Redistribution: Taxes, transfers, and programs to support
low-income populations.
4.​ Policy Perspective
○​ Global Poverty: Challenges and policies to reduce poverty worldwide.
Chapter 3: Supply and Demand (Introduction if covered)
1.​ Market Participants
○​ Goals and Constraints: Understanding the behavior of consumers, producers,
and government.
○​ Specialization and Exchange: Importance of comparative advantage and trade.
2.​ Key Concepts in Demand
○​ Law of Demand: As prices decrease, quantity demanded increases (ceteris
paribus).
○​ Determinants of Demand: Factors influencing demand such as income, tastes,
prices of substitutes, and expectations.
○​ Shifts vs. Movements: Changes in demand vs. changes in quantity demanded.
3.​ Key Concepts in Supply (If covered)
○​ Law of Supply: As prices increase, quantity supplied increases (ceteris paribus).
○​ Determinants of Supply: Factors like technology, costs, and market conditions.
4.​ Market Equilibrium (Preview)
○​ Interaction of supply and demand to determine prices and quantities.
Graphs and Tables
●​ Understand and interpret demand and supply curves.
●​ Learn how shifts in curves affect market outcomes.
Important Terms to Memorize
●​
●​
●​
●​
●​
●​
Factors of production
Market demand and supply
Equilibrium price
Income mobility
Ceteris paribus (all else being equal)
Law of demand and supply
Practice Questions
1.​ Explain how income distribution affects economic output.
2.​ Define and provide examples of factors of production.
3.​ Differentiate between a movement along the demand curve and a shift in the demand
curve.
Important terms to know:
●​ 3 Basic economic concepts:
○​ What to produce
○​ How to produce it
○​ For whom to produce it for
●​ Factors of Production:
○​ Land (natural resources)
○​ Labor (number and skills of workers)
○​ Capital (machinery)
○​ Entrepreneurship (skill, services, processes)
●​ Production Possibilities curve
○​ Represents alternative combinations of goods and services
○​ To move it, add in more factors like time and resources
○​ Best possible mix is the essence of the what challenge
●​ Lassiez-faire
○​ Leaving the economy to make it’s own decisions, no gov
●​ Nominal GDP
○​ Amount of goods * price per good
●​ Real GDP
○​ Amount of goods * price per good, adjusted for inflation
●​ Individualist income dependencies
○​ The quantity and quality of resources owned
○​ Price that those resources command in the market
●​ Personal distribution of income
○​ Tends to be more equal as countries develop