Economic Systems

Economic System

A method used by a society to produce and distribute goods and services.

Three Key Economic Questions

What to produce, how to produce, and for whom to produce.

Factor Payments

The income people receive in return for supplying factors of production, such as wages for labor, rent for land, and interest for capital.

Safety net

A set of government programs that provide assistance to individuals in financial need during emergencies or economic downturns.

Standard of Living

Level of economic prosperity; rises if the countries population grows.

Traditional Economy

Relies on habitat to decide the answers to the 3 key economic questions, little room for change or innovation; the work tends to be divided in genders; slow to adopt new innovation.

Consumer

Someone who acquires goods and services for his or her own personal use.

Producer

Someone who makes goods or offers services to others.

Pros of a Market Economy

Producers can decide what to produce, consumers can buy what they want; getting help is easy; Innovation

Cons for Market Economy

government has no say; sales would go to one company; may harm consumers; businesses can make their prices as high as they want; possible monopolies

Incentive

The thing that motivates them- the idea that consumers will want or need what their offering.

Competition

Producers battling over who can make the most profit.

Command Economy

The government decides what will be produced, how much will be produced, and how much they cost.

Monopoly

When a company controls the entire industry without any competition.

Antitrust Laws

Prohibit monopolies and other activity that reduces competition.

Federal Trade Commission (FTC)

The government agency that was created in 1914 to carryout powers in the clayton act.

Tariffs

Taxes on goods from other countries.