Economic Basics
Things that are necessary for survival, such as food, water, and shelter.
What are needs?
In this economic system, individuals and businesses make most economic decisions.
What is a free/market economy?
People or organizations that purchase and use goods and services.
Who are consumers?
Employees who perform work for a business represent this factor of production.
What is labor?
A business such as a hair salon that primarily performs activities for customers is this type.
What is a service business?
Physical products that can be purchased, such as a phone, shoes, or a car.
What are goods?
In this system, the government makes most major decisions about what and how goods are produced.
What is a command economy?
Businesses or individuals that create goods and services.
Who are producers?
Trees, water, minerals, farmland, and other resources from nature fall into this category.
What are land/natural resources?
A mining company that removes iron ore from the ground is this type of business.
What is an extraction business?
This exists because people have unlimited wants but limited resources.
What is scarcity?
This economic system combines private business ownership with government involvement and regulation.
What is a mixed economy?
The opportunity to earn money encourages people to start businesses and take risks.
What is the profit motive?
Machines, buildings, tools, and equipment used to produce goods and services are examples of this.
What is capital?
Walmart purchases products from manufacturers and resells them to consumers. This makes Walmart this type of business.
What is a merchandising business?
Every economy must answer these three questions about production.
What to produce, how to produce, and for whom to produce?
A company transforms wood into a dining-room table. This creates this type of utility.
What is form utility?
This system allows individuals to own businesses, make business decisions, compete, and seek profit.
What is private enterprise?
A person who organizes resources, starts a business, makes decisions, and accepts the risk of failure represents this factor.
What is entrepreneurship?
A company takes raw materials and transforms them into finished products.
What is a manufacturing business?
A restaurant has enough money to either hire two additional workers or purchase a new oven, but not both. This concept forces the owner to make a choice.
What is scarcity?
A restaurant introduces mobile ordering, allows customers to pay through the app, and lets them pick up their food without entering the restaurant. Name two different types of utility that could be created and explain each.
What are possession and place utility? Possession: easier purchasing/payment. Place: convenient pickup/access. (Other well-defended answers could be accepted.)
Customers stop buying a restaurant's food, so the restaurant changes its menu and lowers some prices. This demonstrates the influence of this group on producers.
Who are consumers?
A bakery owner purchases a $15,000 commercial oven to increase the number of loaves the business can produce. Which factor of production did the bakery increase?
What is capital?
A coffee shop purchases the bakery that supplies its pastries so it can control both production and retail sale. This strategy is called this.
What is vertical integration?