Economic Systems
This type of economy is driven by supply and demand, with little government interference.
What is a Free Market?
What are the land, labor, capital?
Two local pizza restaurants are on the same street. To attract more customers, each lowers prices, improves quality, and offers new menu items.
What is Competition
rewards or penalties that motivate and influence an individual's or organization's decisions and behaviors.
What is Incentives
A factory produces toys but also pollutes a nearby river, harming local fishers.
What is Negative Externalities
In this system, the government makes all major economic decisions, such as production and pricing.
What is a Command Economy?
A software company keeps funding a failing app because they’ve invested millions — even though newer projects could bring more profit.
What is sunk cost fallacy?
A farmer can grow only corn or wheat because resources are limited. If all resources are used to grow corn, none are left for wheat. The graph showing the maximum possible combinations of two goods
What is the Production Possibility Curve (PPC)
A city wants to reduce rat infestations, so it offers a cash reward for every dead rat. Soon after, people start breeding rats to collect more rewards — making the rat problem even worse.
What economic concept does this situation illustrate?
What is the Cobra Effect?
Draw a circular flow chart using McDonalds Burgers as an example
Draw
He wrote The Wealth of Nations and is known as the father of capitalism.
Who is Adam Smith?
A student spends all weekend studying for an exam instead of visiting family. The time lost with family represents this.
What is Opportunity Cost?
A farmer trades a basket of apples to a baker in exchange for a loaf of bread. Both the farmer and the baker agree to the trade because they each value what they receive more than what they give up.
What is Voluntary Exchange?
Subsidies and loans are an example for a mixed economy in a stable government
What are Provisions?
This type of market failure occurs when one party in a transaction has more or better information than the other party
What is Information Astmmetry?
An economy based on customs, traditions, and beliefs, often found in rural or undeveloped regions.
What is a Traditional Economy?
A city decides to build a public park instead of expanding parking lots. The reduced parking space is this.
What is trade-off?
Buyers and sellars are able to concentrate their efforts in areas where they have an advantage
What is Specialization?
A baker, a butcher, and a brewer each work to earn a profit. Without intending to, their efforts supply the town with bread, meat, and beer efficiently, benefiting the community as a whole.
What is the Invisible Hand?
Because fireworks displays are costly and everyone can watch them without paying, few private companies are willing to host them. This lack of incentive to provide the good is an example of what?
What is Free Rider [Problem]
In this type of system, the government owns and controls key industries, but individuals may still own some property.
What is Socialism?
A bakery produces 100 cupcakes at a total cost of $200. When it increases production to 120 cupcakes, the total cost rises to $240.
What is $2 per cupcake?
$240 − $200 = $40 increase in cost;
120 − 100 = 20 more cupcakes
→ $40 ÷ 20 = $2 marginal cost per cupcake
One of the fundamentals of capitalism that emphasize that customers influence the choices of what a company offers as a good or service.
What is Consumer Sovereignty?
Social media platforms grew rapidly in the 2000s because no agency required approval to launch or experiment with features. This freedom accelerated global communication but also created new challenges like misinformation and privacy issues.
Permissionless Innovation
A movie ticket is a type of this good
Non Rivalrous Club Good