Economic Concepts

Economic Continuum

Command- far left Market- far right Most countries fall in between (communism, socialism, capitalism)

Market Economy

Consumers decide what is produced by the purchases that they make Business make production decisions Consumers earning more money purchase more goods and services Consumers are motivated to work in order to earn more money

Possession Utility

Enhances value by allowing for easy use by consumer or transfer of ownership to consumer

Form Utility

Enhances value by creating more useful or desirable products out of raw materials or separate parts

Time Utility

Enhances value by having a product or service available to consumers during a certain time of day, week, month or year. Ex. Stores staying open after 5 p.m. for those who work during the day Retailers providing gift wrapping during the holiday season

Place Utility

Enhances value by placing products or services in easily accessible location for consumers Ex. Banks placing ATMs outside convenience stores, stadiums, theaters, etc. Restaurants providing delivery or curbside pickup

Information Utility

Enhances value by supplying consumers with information

Labor

Human resources Includes all people who work within an economy

Command Economy

One person or one group of people make production decisions One person or group of people owns all businesses and runs all businesses One person or group of people decides who will receive the goods and services produced

Monopolies

Refer to one company controlling a product market -Have no competition -Are harmful to free enterprise -Are regulated by the U.S. government -Illegal to have a monopoly

Land

Natural resources found on earth Includes everything contained in the earth or seas

Oligopolies

-Are a few companies controlling a product market -Can affect price and competition

Mixed Economy

-Have a mixture of the market and command economic systems -Most present-day global economies are varying mixtures due to lessons learned over history -Great Depression of the 1930s showed us the need for some government regulation in a free market -Collapse of the Soviet Union showed us the need for some personal freedoms in a command system

Socialism

-Is an economic system in which : -There is increased government involvement -The goal is to keep prices low and provide jobs for everyone through government-owned businesses -Is somewhat vague in its definition because of its position on the continuum -Often proves to be a temporary phase countries go through -Includes additional social services in order to secure a certain standard of living

Capitalism

-Is an economic system in which: -Business are privately owned -Product development is proportionate to the accumulation and reinvestment of profits gained in a free market -Government is usually democratic and maintains fewer social services than in a socialist country Ex. United States and Japan

Communism

-Is an economic system in which: -Government runs and controls most aspects of daily life -There is little or no economic freedom -Government assigns/decides jobs and education or if they continue getting paid if they stop working Ex. China and North Korea

Economic Resources

Are scarce and cannot meet all human wants and needs

Entrepreneurship

Involves human skills required to start and run a business Organizes the other three factors to create economic goods and services

Free Enterprise System

Is an economic system which: -Uses the capitalist approach -Encourages people to start and run businesses without government involvement -Encourages competition -A struggle between companies

Law of Diminishing Returns

Is the rule which states at some point adding more factors to a production process will not improve returns

Economic Utility

Is the value added to a product or service by the role of marketing Includes these 5 types:

Factors of Production

Land Labor Capital Entrepreneurship

Capital

Monetary resources need to start and operate a business or goods used in the production process