Economics unit 1 test

How doesn't a good differ from a service?

Good is something tangible while a service is something someone does for you

command economy

A central authority makes most decisions. Example would be North Korea or US SR. To positives would be change directions in short amount of time health and public services are available to everyone at little cost. Two negatives would be no reward for individual initiative and doesn't meet the wants of consumers

What is the difference between consumer and capital goods?

Consumer goods are intended for final use by individuals while capital goods are used by businesses to produce other products

What is the difference between durable and nondurable goods

Durable goods are made to last 3 or more years while nondurable goods last less than 3 years

Traditional Economy

Economic activity comes from ritual habit or custom Example would be the Amish. Two positives are everyone knows their role and you know what how and for whom to produce. Two negatives would be discourages new ideas lack of progress can lead to a lower standard of living

What are the characteristics of free enterprise capitalism?

Economic freedom, voluntary exchange, private property rights, profit motive, competition

What are the three basic questions each economy must answer?

For whom to produce? What to produce? How to produce?

market economy

People and firms act in their own best interest to decide what how and for whom to produce. Example would be Canada Japan or Germany. Two positives can adjust to change and high degree of individual freedom two negatives are businesses and workers face Uncertainty and doesn't provide basic needs for everyone

What does scarcity mean?

The condition that results from society not having enough resources to produce all the things people would like to have

Define wealth

The sum of tangible economic goods that are scarce useful and transferable

What is the difference between value and utility?

Value is the worth of a good or service while utility is the ability of a good or service

What are the factors of production?

land- natural resources not created by humans affect example would be a fish labor- includes people with all their efforts and abilities example would be workers capital- The tools equipment and factories used in production example BMW factory machinery entrepreneurship- individuals who start a new business to bring the product to market example would be Steve Jobs