Traditional Economies
What is another, less common name for a traditional economy?
Custom Economy
What is an example from history of a Command Economy?
The Inca Empire (1400-1500 CE)
What is the name of Adam Smith's book outlining his observations, theories and remarks on economics?
(An Inquiry into the Nature and Causes of) The Wealth of Nations
What is economics?
The study of how people make choices about what to produce, how to produce it, and to produce it for
What is the definition of bartering?
The direct exchange of goods and services without using money
In a traditional economy, economic decisions are primarily based on what?
Customs, traditions, and beliefs
In a command economy, who makes the key economic decisions?
The government or a central authority
Adam Smith believed that breaking down tasks into smaller parts could increase productivity. What is this practice called?
Division of Labor
In part, economics studies three parts of a process. What are those three parts?
Production, Distribution, and Consumption
What are the two categories of things that people spend money on?
Goods and Services
How are goods and services typically distributed in a traditional economy?
Bartering
What is one disadvantage of a command economy?
Greater implications in deciding what needs to be produced
Lack of consumer choice
Prone to shortages and surpluses, often leads to corruption
Goods production not always matched to demand, and planning can lead to rationing
Innovation is discouraged & people are rewarded for following orders not taking risks
Adam Smith's ideas about economics were influenced by which philosophical movement of the 18th century?
The Enlightenment
What is a need? Explain and give two examples
Essential goods and services required for survival and basic well-being
Food, Water, Shelter, Clothing, Healthcare
What is the definition of money?
A generally accepted medium of exchange used to buy goods and services
What role does the government have in a traditional economy?
Limited role, there to primarily maintain social order and protect traditions
What is the word or phrase for when some people in a society have more authority, power, and influence, and others have less?
Social Hierarchy
What economic theory, popularized by Adam Smith, suggests that people acting in their own best interests can benefit society as a whole?
The Invisible Hand
When did economics start?
When organized societies were formed and people started exchanging goods and services with each other
What are two disadvantages of bartering?
Lack of double coincidence of wants
Difficulty in storing value
Inefficiency
Lack of divisibility
Limited market reach
What is one disadvantage of a traditional economy?
Slow to adapt to change
Limited economic growth
May perpetuate inequality
Exposed to changes in nature and weather
Limit population growth
Vulnerable to competitive and growth oriented market economies
What are two benefits of a command economy?
Prices are controlled and people know costs
Can achieve rapid industrialization
Can address social and economic inequality
Can more easily manipulate large amounts of resources for large projects
Society can be shifted to meet government vision
According to Adam Smith, what is one reason why competition is a valuable part of an economy?
Prevents exploitation of consumers
Encourages economic innovation
Keeps participants honest
What is a service? Explain and give two examples.
Intangible activities, usually work, that are undertaken for others
What is capitalism?
A system where individuals & businesses own and control the means of production, distribution, and exchange of goods and services, with the goal of making a profit