Market systems

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36 Terms

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Economics
The study of how to meet unlimited, competing wants with limited resources; The process of deciding how to get the most with the least; Obtaining the greatest satisfaction from the least amount of resources
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Wants
Desires for things that may or may not be necessities
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Economic Wants
Obtained by spending money
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Noneconomic Wants
Obtained without money
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Resources
Items used to accomplish activities such as producing or providing goods and services
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Scarcity
The gap between unlimited wants for goods and services and limited resources
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Economizing
Deciding which goods and services lead to the most satisfaction
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Opportunity Cost
The benefit that is lost when you decide to use scarce resources for one purpose rather than for another
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Consumption
Economic process or activity of using goods and services
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Consumer
Anyone who uses goods and services
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Production
Economic process or activity of producing goods and services for consumption
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Producer
Individuals who make or provide goods and services
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Exchange
The circular movement of resources, goods, services, and money payments
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Distribution
Economic process or activity by which income is divided among resource owners and producers
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Domestic Trade
Producers and buyers are in the same country
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Global Trade
Product is purchased in one country and consumed in another
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Import
Products bought from producers in other countries
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Export
Products that businesses sell to other countries
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comparitive advantage
the ability to produce a good at a lower opportunity cost than another producer
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absolute advantage
the ability to produce a good using fewer inputs or at a lower cost than another producer
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Economic System
The organized way in which a country handles its economic decisions and solves its economic problems
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Traditional Economies
Sometimes called subsistence systems, these economies consume all that they produce to satisfy basic needs such as food and shelter
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Command Economies
The government owns and operates many or all of the means of production and distribution.
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Market Economies
Individuals and businesses own the means of production and distribution
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Primary Types of Command Economies
Communism and Socialism
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The Three Basic Economic Questions
What to produce? How to produce? How to allocate products?
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Law of Demand
the quantity of a good or service that consumers will buy varies inversely with the price of the good or service
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Law of Supply
the quantity of a good or service that will be offered for sale varies in direct relation to its selling price.
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Buyer's Market
Large supply, small demand, lower prices
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Seller's Market
Small supply, large demand, higher prices
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Elastic Demand
Demand changes when prices change
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Inelastic Demand
Demand is constant, even if prices change
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Domestic Activities
Business activities occur all within one country
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International Activities
Business activities occur between nations
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Multinational Activities
Business activities include several countries and each location of this business functions separately
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Global Activities
Business activities include several countries, and there is one company culture as the business functions as one organization