Types of Economies
What is the basic principle of an economic system?
The way in which a society produces and distributes goods and services
What type of economic system does the US follow?
Market economy
What are the key determinates of price?
Supply and Demand
What are the three types of businesses?
Sole Proprietorship, Partnership, Corporation
What is a bond?
Certificate issued in exchange for a loan
What is the definition of a Command Economy?
An economy in which production, investment, prices, and incomes are determined by the government
What does GDP measure?
The health of the economy; the market value of all final goods and services produced within a countries economy in one year
What determines how much a buyer purchases?
1. Price of a good or service
2. Income of buyers
3. Prices of related goods or services
4. Tastes or preferences of consumers
5. Expectations
Which business type has limited liability?
Corporation
Which type of investment has a potential higher payout?
Stock
What is another word for a command economy?
Communism
The profit motive makes producers and large businesses move their companies ........ for ..........
overseas..... lower wages
Supply: A change in price of a product will cause a change in the ............
What is the difference between a publicly-held corporation and a privately-held corporation?
Publicly held corporations are shared with the general public and sold on the stock exchange while privately held corporations are not shared shared with the general public and sold privately
Why do people buy stock?
They believe the value will go up over time
Where would you typically see a traditional economy?
3rd world countries, non-industrialized societies
it can result in low quality items, harm the environment, and is not beneficial to workers
How do we determine price?
By finding the equilibrium; the level at which the quantity supplied equals the quantity demanded
S-corporation
If a company declares bankruptcy, who is paid first? (Bondholders or stockholders)
Bondholders
What is the difference between a mixed economy and a market economy?
A mixed economy has characteristics of both command and market economies while in a market economy, individuals own and operate factors of production
What are the 5 principles of the US economic system?
2. The right to private property
3. The profit motive
4. Competition
5. Consumer sovereignty
The price of an item will go ____ if the supply increases or if the demand for the item decreases
Up
Which type of business has limited life? Why?
Sole proprietorship, it lasts as long as the owners life
What is the difference between a common stock and a preferred stock?
A preferred stock is harder to obtain, don't have the same voting rights, but are paid off before common stockholders
A common stock is what most people purchase and represents ownership and claim on part of the profits. one stock=one vote