Economics- chapter 18 & 19 notes
What are the strengths of the market economy?
able to adjust to change, individual satisfaction, consumers are focus, lack of government interference, incentives for hard work, and variety of quality for goods and services
how does technology effect production?
advances knowledge to try new things and improves existing ideas
what are opportunity costs?
assesses the value of the next best alternative
what is a need?
basic necessity for survival
What is freedom of choice?
buyers make decisions on, what to produce, what to buy, where to buy, and how much to buy
what are choices?
buying needs or wants
What are the strengths of command economies?
can shift resources in businesses quickly from one to another
What are the weaknesses of command economies?
doesn't meet needs and wants of consumers, lack of incentives for hard work, large bureaucracy makes decisions slowly, not flexible to day-to-day changes, new ideas are discourages, and no individuality
What are the goals of free enterprise?
economic freedom, economic efficiency, economic equity, economic security, economic stability, economic growth, and trade offs among goals
What is economic equity?
fairness(make sure economic policy benefits everyone) and equal pay for equal work(Equal Employment Opportunity)
What is a mixed economy?
found in all market economies, government interference, allows for regulations, protects consumers and market, and circular flow for economic activity
how does capital effect production?
from previously manufactured goods used to produce other goods and services
how does land effect production?
from the actual property and all other natural resources ("gifts of nature")
What is the diminishing marginal utility law?
get less use out of additional items
What is command economy?
government owns factors of production and answers the 3 Q's(communist/socialist governments) and individuals simply follow orders
What is economic growth?
gradually increasing amounts of goods and services produces and expand with the population
what are economic models?
graphs or scenarios that explain economic theory and predict economic behavior
What is the invisible hand?
guidance of the economy by self-interest(lack of government)
What do economic systems not make decisions for?
how to run an economy
What is freedom enterprise?
individuals make economic decisions and limits restrictions from government
What is private property?
individuals own all property(not government) and free to buy whatever we can afford
What is limited government?
individuals own factors of production(capitalism), laissez faire("let alone"), and government plays no role in economic decisions
What is a market economy?
individuals own factors of production, answer the 3 Q's, and have free interaction without government interference
what is an example of luxuries?
jewelry
what are examples of factors of production?
land, labor, capital, entrepreneurship, and technology
What are the characteristics of the U.S. economy?
limited government, freedom of enterprise, freedom of choice, profit incentive, private property, and competition
what is macroeconomics?
looks at global level
what is microeconomics?
looks at individual levels
What is economic freedom?
make choices freely, start businesses, own private property, buy and sell without restrictions, and work any job we want
what are the two groups within economics?
microeconomics and macroeconomics
What is profit incentive?
motivation to sell as many goods to maximize profits(spurs competition), profit gains, and money made after expenses are paid
what are factors of production?
necessities to produce goods and services
What are the weaknesses of traditional economies?
no adaptions(hostile to change), isolation from isolation, and low standard of living
What are the strengths of traditional economies?
people know how it works, 3 Q's are easily answered, everyone knows their roles, and have limited competition
What is economic security?
protect against the unforeseen risks outside of normal control, and prepare for worst case scenario
What is economic stability?
reduce the ups and downs of the economy and gradually increase standard of living
What are the weaknesses of the market economy?
rewards the most productive, leaves those unable or handicapped behind, and market failures
how does entrepreneurship effect production?
risk takers start new businesses
What is competition?
rivalry between companies to win the support of consumers of goods and service; leads to lower prices, better quality, better customer service, and variety
what are trade offs?
sacrifice of buying one product or service for another, opportunity costs, economic models, and production possibilitiy curves
What are trade offs among goals?
sacrifice of one item is to benefit another
what is a fundamental economic problem?
scarcity
What is a economic model?
shows a continual flow of resources and income between businesses and consumers
what is the production possibilities curve?
shows the maximum combinations of goods and services that can be produced from a set amount of resources at a given time
what is economics?
the study of how individuals and societies make choices about the ways to use scarce resources to fulfill unlimited wants.
how does labor effect production?
the workers create or perform good services
What are the types of economies?
traditional, command, market, and mixed
What is economic efficiency?
use resources to the maximum without exceeding cost over benefits
What is a traditional economy?
used in 3rd world countries, have multiple generations, and have old customs, etc.
what is scarcity?
wants exceed resources available, all resources are limited, and wants are unlimited
what is a want?
way of expressing your needs
What is a cost benefit analysis?
weighing the cost of an item against the benefit gained(measure opp. cost) and diminishing marginal utility
What are the 3 basic economic questions?
what to produce, how to produce it, and for whom to produce