Economic Basics
Need
Capitalism and Free Enterprise are synonyms for this economic system.
Free Market Economy
When prices are low, demand goes in this direction.
Up
One of the four conditions for pure competition.
1. Large number of firms
2. identical products
3. No barriers to entry or exit
4. No price controls
Something that is not necessary for your survival, but something you would desire.
Want
No private property and total government control over all economic decisions.
Centrally Planned Economy
When prices are high, demand goes in this direction.
Down
Monopoly that is allowed to exist so that natural resources are not strained.
Natural Monopoly
The three factors of production.
Land, Labor, and Capital
Government intervention between the households and firms is the key indicator of this economic system.
Mixed Market Economy
When prices are low, supply goes in this direction.
Down
Actions of a government agency may limit or create barriers to a market creating this type of monopoly.
Government Monopoly
The use of resources in such a way as to maximize the output of goods and services
Efficiency
Sector where the government is responsible for taking care of certain goods and services such as roads and first responders.
Public Sector
When prices are high, supply goes in this direction.
Up
The only way for monopolies to make money is through this questionable yet effective practice.
Predatory Pricing
A process that analyzes multiple trade-offs to select the most desirable outcome.
Cost/Benefit Analysis
"Hands off!" Let's the households and firms make their own economic choices.
Laissez Faire
When there is too much demand and not enough supply.
Shortage
Issued by the government and gives a company exclusive rights to sell a new good or service for a specific period of time.
Patent