Traditional Economy
What determines economic decisions in a traditional economy?
Customs and traditions determine economic decisions
Who makes the major economic decisions in a command economy?
The government makes all the major economic decisions.
Which type of economic system is characterized by private ownership and consumer choice?
Free Market Economy
What does the term scarcity mean in economics?
Limited resources to meet unlimited wants and needs.
What is the definition of goods in economics?
Physical items that satisfy wants and needs.
Give an example of a traditional economy.
An indigenous tribe that uses bartering to trade goods.
What is a primary disadvantage of a command economy?
Lack of consumer choice and inefficiency.
What drives production decisions in a free market economy?
Consumer demand.
What are some ways to deal with scarcity?
Making choices, creating more resources, and better utilizing existing resources.
Define opportunity cost.
The next best alternative that is given up when making a choice.
How do traditional economies respond to economic questions?
They rely on historical practices and cultural norms.
Give an example of a command economy.
North Korea.
In a free market economy, what is the role of competition?
To encourage innovation and lower prices
What are the causes of scarcity?
Unlimited wants but limited resources.
What are the three types of resources?
Natural resources, human resources, and capital resources.
What is a key feature of traditional economies?
They often resist change and prioritize community over individual profit.
How does a command economy answer the basic economic questions?
The government decides what to produce, how to produce it, and for whom to produce.
What are the benefits of a free market economy?
Greater efficiency, innovation, and consumer choice.
How does scarcity affect economic decision-making?
It forces individuals and societies to make choices about resource allocation.
What is the profit motive?
The desire to earn money in a free market economy.
In a traditional economy, what is the main source of income?
Subsistence farming or hunting and gathering.
What is one key feature of a command economy?
Centralized planning of economic activities.
How do prices get determined in a free market economy?
By the forces of supply and demand.
What is a trade-off?
Giving up one thing to get another.
What are the four basic economic questions?
What to produce? How to produce? For whom to produce? and Who will receive the economic benefits?