Factors of Production
What are the four factors of production?
Land, Labor, Capital, Entrepreneurship
In which system does the government make most decisions?
Command economy.
What happens to demand when price increases?
Demand decreases.
What is a broker’s job?
Helps investors buy and sell stocks and bonds.
What is an injection in the circular flow of money?
Money entering the economy (e.g., investment, exports, government spending).
Give one example of “Land” as a factor of production.
Water, oil, soil, or natural resources
Which economic system is based on customs and traditions?
Traditional economy.
What is the point where supply and demand meet called?
Equilibrium.
What does diversification mean?
Spreading money into different investments to reduce risk.
What is a leakage in the economy?
Money leaving the economy (e.g., savings, taxes, imports).
Why is entrepreneurship important in production?
Entrepreneurs organize the other factors and take risks to make products.
What makes a market economy different from a command economy?
In a market economy, individuals decide what to produce; in a command economy, the government decides.
What causes a shortage?
Price is too low — demand is higher than supply.
What is the difference between a stock and a bond?
Stock = ownership; Bond = a loan you give to a company or government.
How does government spending act as an injection?
It adds money by paying for projects and services.
How does capital make production faster or easier?
Machines, tools, and buildings increase efficiency.
What kind of economy do most modern countries have?
A mixed economy.
Name two things that can shift the demand curve.
Tastes, Income, Prices of related goods, Information, Size of market (any two).
What type of investment combines money from many people and is managed by a professional?
A mutual fund.
If people save more and spend less, what happens to the economy’s flow of money?
It slows down because there are more leakages.
Your factory uses more advanced machines. Which factor improved, and what is the effect?
Capital improved → productivity increases → more output.
Name one advantage and one disadvantage of a command economy.
Advantage – stable prices or equality; Disadvantage – less freedom or inefficiency.
A new tax increases production costs. Which curve shifts, and in what direction?
Supply curve shifts left (supply decreases).
Explain “risk vs return.”
Higher risk can lead to higher potential return; lower risk gives smaller but safer returns.
Describe the relationship between injections, leakages, and the circular flow model.
When injections > leakages, the economy grows; when leakages > injections, the economy slows down.