Lesson 2.1 The Three Key Economic Questions Lesson 2.2 Free Markets Lesson 2.4 Mixed Economy Quiz Study Guide

How is product market physical flow in a mixed economy?

Goods and services flow from firms to households as firms supply the goods and services that consumers buy in the product market. Goods and services also flow from firms to government, which purchases goods and services.

Basic Economic Questions What goods and services should be produced?

Goods: Food ,clean water ,and homes Services: Gas stations ,car washes , and technology support stores

Determine Central Ideas Consider the example of shirt makers in the section "Incentives and Competition." Suppose that all but one of the manufacturers went out of business. What might happen to shirt prices if there were only one manufacturer? What might happen to the quality and number of choices? Why?

If all the manufacturers but one went out of business selling more striped shirts than polka-dotted shirts. This gives the manufacturer the incentive that there will be more potential sales or profits to produce more striped shirts. Since there are no other manufacturers to make more striped shirts means that the producers will charge higher prices for those shirts to maximize profits and to help discourage that from happening. if a striped shirt cost $30.00 instead of $25.00 to have customers pursuing their self-interest will definitely buy the lower priced shirts instead or drop the prices of the popular shirts.

What is concentration?

Intense ,narrow focus

What is Mexico's economic system like?

Mexico's state-owned oil industry, PEMEX, is a crucial part of the nation's economy. It generates about a third of government revenues, which allows the government to keep taxes low—tax rates in Mexico are the lowest among developed countries. In addition, Mexico has a flourishing private sector, though its manufacturing has been challenged in recent years by China. Nearly half the people live in poverty, and remittances from workers abroad help many Mexicans get by.

What is self-sufficiency?

The ability to provide for ones own needs

What is profit?

The amount of money a business receives in excess of its expenses

Cite Evidence Which is the more important economic goal for society in a traditional economy, equity or growth? Cite evidence to support your answer.

The most important goal for society in a traditional economy is growth because that way they can meet their needs to become successful with few mechanisms to deal effectively with the effects of environmental disaster like a flood or a drought. Then adopt new ideas of technology to have a wide array of goods at their disposal with a low standard of living that grows over time.

Identify What societal values play a role in how the three basic economic questions are answered in the United States?

The three economic questions are answered in the United States for the first one when we have to produce food and shelter in our society in order to satisfy everyone's needs or wants. For the second one when a society must decide how to produce the goods and services effectively by using fuel to generate electricity,oil,solar power, or nuclear power requiring land,labor,and capital. Last for the third one is when the society makes the decision to determine how the goods and services are consumed like the need for food and medical care or driving a luxury car, affording bus fare, and a college education to get from place to place in order to survive in the United States.

The distribution of income received in the form of rent, wages, or interest is the main factor that determines

Who consumes goods and services.

What is a synonym?

Word that, relative to another word, has the same meaning

Draw Inferences Can an economy make the transition from a free market to a command system? If so, would privatization be involved? Why or why not?

Yeah definitely an economy can make the economic transition from a free market to a command system by not using Privatization because that would give enterprises the ability to be owned by the individuals themselves instead of the government.

What is the standard of living?

A level of economic prosperity

What is economic transition?

A period in which a nation moves from one economic system to another.

Who is Adam Smith?

According to him competition and our own self-interest actually help to keep the marketplace functioning

Determine Central Ideas Think about Adam Smith's concept of the "invisible hand." Explain in your own words what this is and how it works in a free market economy.

Adam Smith's concept of the "invisible hand" is when self-interest and competition team up in order for the marketplace fair and have prices work properly for the economy. Self-interest drives consumers wild to pay for certain goods ,services ,and firms that are to be produced. Competition is the reason for bigger production companies and keeps their desire in check in order to make prices more expensive over time reflecting the price of making these products to market forces instead of individual producers in our world.

Categorize As you read "Three Basic Economic Questions," use this graphic organizer to list the three questions and provide at least two examples that illustrate each. The examples need not come from the lesson. Three Basic Economic Questions: Examples: Who consumes these goods and services?

Adults ,children/workers ,entrepreneurs

What is a free market economy?

Answers to the three basic economic questions are made by voluntary exchange in markets

What is prioritize?

Arrange in order of importance

What is a doctrine?

Belief or principle central to a philosophy.

What is intellectual property?

Books ,songs ,or movies they created.

What is quality competition?

Businesses compete with each other on more than just price. The quality of goods and services is another area of intense marketplace competition. Consumers who want to purchase luxury goods, such as the private jet shown here, may pay more because they are concerned about quality rather than about price.

How does innovation promote economic growth?

By introducing new goods and services that create new markets

What is motivating?

Causing a particular response or behavior

What is an element?

Component or feature of a complex whole.

What is consumers' self interest?

Consumers act in their own self-interest, usually seeking out the lowest prices for the goods they want. This store markets its low prices to attract customers who want to save money.

In a free market system, the concept of consumer sovereignty means that

Consumers have the power to decide through their actions what goods and services get produced.

Vocabulary: Determine Meaning One of the advantages of a free market is consumer sovereignty. Why do consumers hold such power in a free market system? Give a specific example to support your answer.

Consumers hold such power in a free market system because consumers in essence, have the power to decide what gets produced which is called Consumer Sovereignty. One example is on social media influencers produce goods and services which their followers like to get you to pay for their stuff. Another example is celebrities in Hollywood who get paid to make movies for the people based on what they want in their films so it may be watched by everyone across the world.

What is consumer sovereignty?

Consumers in essence ,have the power to decide what gets produced

Key advantages of free market economic systems include

Economic efficiency, economic freedom, economic growth, and variety of goods.

What is a mixed economy?

Economic system that has some market-based elements and some government involvement.

An economy that maximizes its scarce resources and can deliver the right goods in the right quantity to the right people at the right price has achieved which economic goal?

Efficiency

Which basic economic goal is most easily achieved in a traditional economy?

Equity

Where in the circular flow model does a paycheck belong?

Factor market, monetary flow

Categorize As you read "Three Basic Economic Questions," use this graphic organizer to list the three questions and provide at least two examples that illustrate each. The examples need not come from the lesson. Three Basic Economic Questions: Examples: How should these goods and services be produced?

Factory manufactured furniture ,electrically outputted cell phones/Uber services ,school tutors

What is equity?

Fairness

What is monetary flow for factor market?

Firms pay households for land, labor, and capital

What is a factor market?

Firms purchase factors of production from households for an arena of exchange

What is physical flow for product market ?

Firms supply households with goods and services

Categorize As you read "Three Basic Economic Questions," use this graphic organizer to list the three questions and provide at least two examples that illustrate each. The examples need not come from the lesson. Three Basic Economic Questions: Examples: What goods and services should be produced?

Food ,shelter/Gas stations ,banks

Basic Economic Questions Who consumes these goods and services?

Goods: Humans ,animals ,insects ,rodents ,and retail workers Services: Drivers ,personnel ,and support ,attendants ,consumers

Basic Economic Questions How should these goods and services be produced?

Goods: farms ,agriculture ,lakes ,rivers ,and experienced construction workers Services: Oil reserves ,plants ,chemical cleaning equipment ,and tech support stations

Which of the following is an explanation of what Adam Smith called the "invisible hand" of the marketplace?

Government regulations influence the decisions of consumers and producers in the market.

What are negative incentives?

High prices are often a negative incentive. When gas prices are high, as shown in this humorous sign, drivers have an incentive to consume less of it. In many cases, high gas prices lead consumers to find ways to drive less, such as walking, carpooling, or taking public transportation.

What is monetary flow for product market?

Households pays firms for goods and services

Use Visual Information Read the section "Factor and Product Markets" and review Figure 2.4, "Circular Flow Model of a Market Economy." How do households supply firms with land, labor, and capital? Provide an example of each.

Households supply firms with land is like when firms purchase or rent land for their own properties in the retail market industry. Households supply firms with labor like when they hire workers,paying them wages or salaries for their labor in order to produce goods and services for the business they are a part of. Households supply firms with capital is like when they borrow money from households to purchase capital, paying households interest or profits in return after they get their paycheck for their 2 weeks of working at that local business.

What is physical flow for factor market?

Households supply firms with land, labor, and capital

Make Comparisons Sweden is an example of a country that has high tax rates on those with high incomes and redistributes that income to others. Where do you think Sweden would be in relation to the United States on the continuum of mixed economies?

I believe Sweden would be at the far left centrally planned section in relation to the United States on the continuum of mixed economies because of their high tax rates on those with high incomes by redistribution so there is income being pointed towards other people instead of the government.

Distinguish Among Fact, Opinion, and Reasoned Judgment People in societies with traditional economies tend to rely on established technologies, have access to limited goods, and lack modern conveniences, but they love what they do for work. What part of the preceding statement is an opinion? Explain your answer.

I believe the part of the preceding statement that is an opinion is that they lack modern conveniences because most of the time it revolves around extended family where boys take their father's jobs ,girls take their mother's jobs and stay relatively small and close to each other. Also they support the community ,rather than themselves or immediate family where agricultural and hunting practices lie at the center of people's lives ,laws ,and religious beliefs.

Evaluate Explanations Read the quotation from Adam Smith about how self-interest motivates our economic interactions. Now describe an example of an economic interaction you have had and how your self-interest motivated you. Can you think of an example of an economic interaction in which you did not put your own self-interest first?

I remember one night eating dinner with my family and I washed their dishes before mine because I wanted to be nice and help out. When I did this I was given cash in return for doing chores but I didn't put my own needs first before others making me a less selfish person. Last, I remember being told that I should have just washed my own dish and let them wash their own dishes but I did it as an act of service to be nice to them instead of to myself giving myself a lack of self-interest by thinking of others needs before my own.

Vocabulary: Determine Meaning of Words Read the third paragraph of "The Reasons for Mixed Economies." What do you think the word inherent means?

I think the word inherent in this context means unnoticeable because in the sentence it says every economic system has inherent problems in addressing the three basic questions making it seem like they were never able to fix this issue.

Explain an Argument In a society that favors economic equity over economic freedom, who would benefit? Explain.

In a society that favors economic equity over economic freedom the economic equity would benefit because that way everyone would get an equal share of the goods and services the nation produces. If they didn't do this people would face limits to their individual freedom to buy what we can pay for, to seek work when we want, to own property, and become entrepreneurs. Causing us to accept that we would fail to have freedom and experience poverty instead.

How is factor market physical flow in a mixed economy?

In the factor market, individuals supply their labor to firms, where they work at producing goods and services in return for wages. Some individuals also supply labor to the government.

How is product market monetary flow in a mixed economy?

In the product market, money flows from households to firms as consumers purchase goods and services. Money also flows from households to government in the form of taxes.

What is Iran's economic system like?

Iran is ruled by Islamic religious leaders, and it has a largely state-controlled economy. Major industries—including oil, mining, transportation, banking, and utilities—remain in government hands. In addition, the theocratic government supports the activities of Bonyads, foundations that control an estimated 20 percent of the Iranian economy. The government determined to privatize industries in 2006, but the effort has not taken hold. Private businesses in Iran tend to be small and focused on farming, small-scale workshops, and services.

What is a household?

Is a person or group of people living in a single residence

What is a market?

Is any arrangement that allows buyers and sellers to exchange things

What is an incentive?

Is the hope of reward or fear of penalty that encourages a person to behave in a certain way

Analyze Interactions Read the second paragraph of "The Role of Specialization." Many people grow their own fruits and vegetables. Explain whether this makes economic sense. If not, why do you think people might do it?

Many people grow their own fruits and vegetables does make economic sense because it provides land labor and capital for farmers by learning one task at a time instead of doing them all at once. Also by saving resources by avoiding waste they have laying around like old or rotten fruits and vegetables that haven't been harvested for a long time. Lastly, because of this the top performers in most farming fields work extremely hard to sharpen their particular skills whether it's farming ,harvesting , or digging soil to produce more fruits and vegetables throughout the farm to benefit businesses by limiting the number of related necessities allowing them to use these limited resources more efficiently.

Compare and Contrast As you read "Mixed Economies Today" as well as the rest of this lesson, use this graphic organizer to record characteristics of free market and command systems present in the mixed economies in the world today.

Mixed economies Elements of a Market System Private property limited degree of governmental regulation limits government places on business use Operate in certain areas and not in a residential district Elements of a Centrally Planned System Government involved in factor market Keeps order Provides vital services Promotes the general welfare

How is factor market monetary flow in a mixed economy?

Money flows from firms to households as businesses pay workers for their labor in the factor market. Money also flows from firms to government, as businesses pay taxes.

Cite Evidence In North Korea, who buys most of the labor in the factor market? Cite evidence from the text to support your answer.

North Korea has an economy almost totally dominated by the government.State-owned industries produce 95 percent of North Korea's goods. Imports are almost totally banned, and production by foreign countries is forbidden.

What is North Korea's economic system like?

North Korea has one of the most centrally planned economies in the world. The government owns almost all the factors of production and makes almost all production decisions, even rationing food. Military spending accounts for around a quarter of the country's output, which limits opportunities for economic growth. Economic output, growth, and the standard of living are all low, and the country depends on international aid.

What is non-price competition?

Occurs when producers compete by offering higher-quality goods or goods with different features

What is price competition?

One way businesses compete is through prices. If a business can offer its goods at a lower price than its competitors, it will usually gain customers. Low labor costs in producing countries, combined with the low cost of shipping goods via container ships such as the one shown here, can make it cheaper to produce goods overseas and ship them to the United States. This reality places competitive pressure on American firms.

What are positive incentives?

Positive incentives reward people for taking certain actions. "Cash for Clunkers" was a federal government program that gave rebates to consumers who traded in "clunkers," or old cars, to purchase more fuel-efficient vehicles. The goal of these positive incentives was to motivate consumers to make purchases that would improve the environment and stimulate the economy.

What is producers' self interest?

Producers act in their own self-interest, seeking to earn as much as they can in return for their goods and services. This baseball player acted in his own self-interest when he switched teams to receive more money for his services.

Where in the circular flow model does a new car on display in an auto dealer's showroom belong?

Product market, physical flow

What is private property?

Property owned by individuals or companies and not by the government or the people as a whole.

What is a traditional economy?

Relies on habit ,custom ,or ritual to answer the three basic economic questions

What is privatization?

Selling enterprises operated by the government to individuals

What is a safety net?

Set of programs to protect people who face unfavorable economic conditions such as layoffs ,injuries ,or natural disasters

What is substantial?

Significant , sizable , and meaningful.

Draw Conclusions What do you think may be some of the inherent reasons why nations today do not have pure free market economies?

Some of the inherent reasons I think nations today do not have pure free market economies is that since Smith said his statement about laissez faire government invention has increased for several reasons. First, some of the necessities of our society would be difficult to meet in the marketplace. In addition governments supply some of our basic needs in order to reach our equity goal to ensure that all members of our society can benefit from this. Last, the society could rely mainly on private schools to educate its children, but some families wouldn't be able to afford sending their children to school.

Which of the following describes the benefits of specialization in a free market?

Specialization leads to efficient use of capital, land, and labor.

Compare and Contrast Think of an example of a product or service you buy for which you have lots of choices. Now think of an example of a product or service you buy for which you have few or no choices. What are the differences between the markets for those two items?

Starbucks sells lots of different products ranging from coffee ,tea ,baked pastries, and Frappuccino's at all of their locations. Raising canes strictly only sells the products of the fried chicken fries with toast and drink combos only at their limited number of locations across the country. The difference between Starbucks and Raising Canes is that Starbucks sells coffee and is across the globe while Raising Canes sells fried chicken and is only at a limited number of locations in the country. Last Starbucks is a very popular location for college students since they have free WIFI while Raising Canes is a less popular location for teenagers since there aren't lots of options to choose from.

What is a product market?

The arena in which households buy the goods and services that firms produce

Classify Look at the photo. What aspects of government involvement in the circular flow does the space program represent?

The aspects of government involvement in the circular flow that the space program represents Factor Market Monetary Flow because the money flows from firms to households paying businesses labor in the factor market to pay the taxes for the space program.

What is laissez-faire?

The doctrine that government should generally should not intervene in the marketplace.

Explain an Argument What economic goals do you think those who want more government regulation are emphasizing? What goals are those who want less government regulation emphasizing?

The economic goals of those who want more government regulation want more factor markets ,keep order ,provide vital services ,and promote general welfare. The economic goals of those who want less government regulation want are private property ,limited degree of government regulation ,limits government places on business use.

How are government expenditures in a mixed economy?

The government uses the tax money it collects to purchase labor from some households and goods and services from businesses.

Evaluate Explanations Why would the government want to be involved in the economy to ensure competition?

The government would want to be involved in the economy to ensure competition by providing us national defense and public education in schools. Also they would protect our private properties of local businesses. Lastly they would ensure fair exchanges in the marketplace between government ran and community ran stores.

Analyzing Analyze the impact of Adam Smith's ideas on the U.S. free enterprise system.

The impact that Adam Smith's ideas has on the U.S. free enterprise system is that he is viewed as one of the intellectual founders of the United States. Smith's ideas have remained influential to this day. The crowning achievement of Smith's writing period was the "Wealth of Nations" published in 1776. This was the most organized analysis and complete argument for free markets and enterprise. Smith's ideas became the basis for economic systems still in force of the United States and in other nations across the world.

What is a factor payment?

The income people receive in return for supplying factors of production land ,labor ,and capital

Draw Inferences How does the introduction of robots into an automobile factory illustrate the economic goal of efficiency?

The introduction of robots into an automobile factory illustrates the economic goal of efficiency by maximizing the amount of robots they can produce with the resources they have in the automobile factory. Giving the people what they need and want, which is robots would increase its economic efficiency but would waste resources producing robots if people preferred automobiles instead .Meaning if the economy cannot give the right quantity to the right people at the right price who want robots won't be efficient because of scarcity.

Use Visual Information Look at the diagram of the circular flow in a mixed economy. Suppose a state government wants to buy some land from various private owners to build a new state office building. Where would that exchange fit in the circular flow model?

The land from various private owners to build a new state office building exchange would fit in the circular flow model as a factor market monetary flow because they need tax firms form the government in order to buy the land so the new state office building can be made like a household under a factor market system.

Draw Conclusions Think about something you purchased recently. Assume you had to work for the money you paid for the item. Would it have taken you more work to get the money or to make the item yourself? How does this show the importance of markets?

The last thing I would have purchased would have been my dress for the Hello Dance meaning that I would have more money to make the item myself than working for it to get the money. This is because I could make $50 in less shifts at work than supplies from minimum wage starting at $15.50 per hour. Last because in order to make the dress i bought you need yarn ,glitter ,and different types of fabric which cost way more than $50 when bought together showing that markets are necessary in order to make the products and goods necessary for people to buy or eat whatever they want at any time they wish to do so.

Interpret Explain how the modern farm is more specialized than the traditional farm. What replaces the human and animal labor in the modern farm?

The modern farm is more specialized than the traditional farm because this farm produces a large amount of one crop with the aid of technology purchased by selling excess goods. The thing that replaces human and animal labor in the modern farm is Artificial Technology or robots in today's society.

What is innovation?

The process of bringing new methods ,products ,or ideas into use

Support Ideas With Examples Look at the photo. Which of the self-regulating features of the economy does this photo illustrate? Give another example of the same feature of the economy and explain how it could affect consumers or producers.

The self-regulating features of the economy this photo illustrates is positive incentives. Another example of positive incentives of the economy is the Toyota Of Orange advertisement jingle of them not selling "lemons" or old cars to make people want to buy the new cars. They did so people would pay more for their cars to lower the opportunity and make more money at the Toyota Of Orange dealership to become more popular than the others.

Draw Conclusions A key innovation during the Industrial Revolution was the steam engine. How did the steam engine contribute to the growth of the textile, or cloth-making, industry?

The steam engine contributed to the growth of the textile, or cloth-making industry by making people value the opportunity of choosing to add the steam engine into the cloth-making industry. This was limiting their individual freedom by working in a manufacturing environment. Then leading to failure and poverty,but will accept the consequences no matter what happens.

What is an economic system?

The structure of methods and principles a society uses to produce and distribute goods and services

What is competition?

The struggle among producers for the dollars of consumers

Vocabulary: Use Context Clues Under "Who Consumes the Goods and Services That Are Produced," use context clues to come up with a definition of the word values.

The word values under this context means to know how our societies make decisions that determine how goods and services are consumed by taking the knowledge to heart and use it whenever possible to get further in life.

How do self-interest and competition affect free markets?

They work together to regulate supply, demand, and prices.

Which of the following BEST identifies how the three basic economic questions are answered in the United States?

Through the combined effect of the decisions of individuals in the marketplace

What is prioritize?

To rank things according to their relative importance or urgency.

Summarize What are the characteristics of a free market economy? Use this graphic organizer to record the major characteristics of a free market. Add more ovals if necessary.

Volunteer exchanges take place in markets Respond efficiently to rapid changing conditions Workers work where they want ,firms produce what they want ,and individuals consume what they want Always seeking profitable opportunities and contributing new ideas and innovations Offer a wider variety of goods and services than any other system because producers have incentives to meet consumers' desires No country today operates under a pure ,unregulated free market system

What are the three basic economic questions all societies must answer?

What goods and services should be produced, how should they be produced, and who will consume them?

Draw Inferences Do business firms benefit in any way from transfer payments? Explain.

Yes business firms benefit in any way from transfer payments for a variety of reasons, such as providing funds to save a failing industry or making payments to disabled workers. More recently, the United States government has paid off over a trillion dollars when it comes to Social Security and Medicare benefits annually.