Scarcity and the Science of Economics
Needs are...
Entrepreneurs are...
People who take on risk by opening a business.
A Free Market/Enterprise Economy is...
an economic system in which the economic resources are primarily owned and controlled by the private sector (the consumers).
A command economy is...
an economy where the questions what to produce, how to produce it and whom to produce it for is controlled by the government/ruler.
an economy that uses aspects of more than one economic system.
Communism is...
forced common ownership of factors of production
What are the four building blocks of most free enterprise economies?
Households, businesses, markets, and governments
Prices...
tell us the demand for a good and how scarce/abundant the good is. Prices tell us the value of each good or service in that society.
Voluntary exchange is...
the act of consumers and producers freely and voluntarily engaging in market transactions, whether it takes place in a store, online, or on a street corner.
desires that can be satisfied by consuming a good or service.
The four factors of production are...
Labor, Land, Capital and Entrepreneurs
Productivity is...
when the value of a product or service compared to the amount of labor needed to produce it.
A traditional economy is...
an economic system where the questions what to produce, how to produce it, and whom to produce it for is controlled by traditions.
A disadvantage to a traditional economy is...
they are not open to new ideas or change.
Socialism is...
system in which government owns and controls some factors of production.
own most of a countries resources- they offer their labor and households act as consumers, consumers vote with their dollars.
The concept of private property is essential to...
capitalism.
Profit motive is...
Profit is the major motivation behind the functioning of the capitalist economy.
Economics is...
Land is...
the natural resources used to produce a product.
Economic growth is...
when a nations total output increases over time.
A market economy is...
an economic system where the questions what to produce, how to produce it, and whom to produce it for is controlled by the consumers.
A disadvantage of a market economy is..
It sustains a high degree of uncertainty.
the government is most likely to provide people with goods and services they could not otherwise afford.
In a free enterprise, businesses...
organize economic resources to produce goods/services. Profit fuels business. Businesses must be efficient.
Economic freedom is...
for an entrepreneur, a capitalist, and a worker to freely choose their line of work. They may also choose what goods and services they purchase and have the freedom to also sell those things.
Self-interest is...
"The consumer is the king" in capitalism. It refers to customer freedom of choice.
Economics involves...
explaining how people deal with scarcity.
The best explanation for opportunity cost is...
The efficient use of scarce resources leads to an increase in...
productivity
system of production, resource allocation and distribution of goods and services within a society.
An advantage of a traditional economy is...
Everyone knows exactly what their function is.
A command economy has _____________, but a socialist economy does not.
all of it's production managed by the government
In a free enterprise, markets...
bring buyers and sellers together. Now markets exist 24 hours a day on the internet. 3 kinds of markets: resource, product, and financial markets.
What is the main motivator for people to choose to either start a business or to work for others to earn their money?
The main motivator is the potential to earn a profit but also for personal reasons such as the desire for independence. Others offer their labor for a wage. The key is all people make their choice voluntarily.
Everyone has the right to enter into legally binding agreements (contracts), including private individuals and business owners. Oral or written contracts are recognized by law.
Scarcity is...
the condition that results from society not having enough resources to produce all the things people would like to have.
The purpose of the production possibilities curve is...
to identify all possible combinations of goods and services an economy can produce.
The factor markets and product markets are...
A disadvantage to a command economy is...
Nothing stops the government from producing things that people don’t need or want.
What is an advantage of a market economy?
It allows personal freedom.
An advantage of a command economy is...
the people tend to have their needs provided for by the government.
enforce the rules of the society. Governments also produce the goods/service of national defense because they are best suited.
In a free enterprise system, personal freedoms are promoted because...
the opinions of the majority and minority matter. In a free market the individual decides what good or service to buy based on their wants. If a business discriminates and takes freedoms away from people it will suffer by limiting its market and/or labor force.
Competition is...
One of the critical parts of a capitalist economy is competition. It suggests that there are numerous buyers and sellers in the market who are driven by self-interest but are unable to have an impact on market decisions through individual actions.