Three Basic Economic Questions

economic social goals

freedom, growth, efficiency, equity, security, stability, employment, environmental protection

mixed economy

government provides some public goods and lets the consumers/producers control other aspects of the economy

standard of living

level of prosperity

safety net

programs to protect people in unfavorable economic conditions

traditional economy

relies on habit, custom, or ritual to answer 3 basic questions (lacks innovation)

factor payments

the income people receive in return for supplying factors of production (land, labor, capitol)

economic system

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

profit

the amount of money a business receives - its expenses

what are the three basic economic questions?

1. What goods/services should be produced? 2. How should they be produced? 3. Who consumes these?

innovation

bringing new goods/services into use

market economy

consumers and producers control the economy

command economy

controlled by the government (lacks freedom and growth) (is strong in security and equity)