ECON TEST 1

Help! I need somebody - HELP - not just anybody

What are the 3 economic questions?

1. What to produce? Output

2. How will we produce it? Input

3. Who gets it? Distribution

In major economic systems it all comes down to who…

who controls the production

3 major inputs required to produce stuff

1. Land

2. Labor

3. Capital

What is the theory of communism according to Karl Marx?

Abolition of private property

In practice are there any pure communist nations?

no

What is often seen in socialist society?

Private property and public ownership and control of industry.

What is same in both communism and socialism?

Economic planning

What is a command economy?

Completely controlled by the government makes all decisions regarding the production and distribution of goods and services, controlling resources and setting prices.

What is a market economy?

The people make choices —> individual driven by profit

Economist Adam Smith described the free market as an invisible hand where individuals and businesses meet societies needs when they seek their own _____

self-interest

What are some things governments must provide because free markets wont?

• Maintain rule of law

• Public goods and services

• Regulating Production

How do government agencies step in when “it” thinks free markets get it wrong?

By regulating production, how they treat their workers, how much they pollute, stop monopolies.

What 2 nations are given as examples of extremes on the spectrum of government involvement and where on the spectrum do they lie?

Denmark , Canada ←—————→ China

What type of economy seems best at handling the circular flow model of goods, money, and resources?

Mixed economy

Economics

The study of how and why government, businesses, and individuals make choices.

Scarcity

 Limited quantity of adequate resources for all our wants.

Insatiability

Everyone has unlimited wants - a person will never be satiated. 

subjective value

Value of an item is determined by its usefulness to the buyer.

Good

Any tangible (physical) thing that has a measurable life span

Service

Intangible items such as the labor of the accountant, the performance of the singer, and the work of a teacher.

Consumer

Buy goods and services.

Producer

Produce goods and services.

Nuisance Good

Goods that a consumer pays to have removed and bear a negative economic cost.

Subjective value  (Diamond-water paradox)

Diamonds are rare and scarce so normally people would pick diamond over water - but if that person was without water for two days the water would become much better than a diamond.

Intrinsic Value

The value of an object is determined by the object itself

Traditional/ barter economy

People trade goods and services for goods and services

Market economy, profit

In a market economy producers own the resources they use to make their products. Consumers use their resources to decide what to buy. Which results to producers and consumers determine what gets made and how and for who. In a market economy there is freedom. And both the producer and consumer make a profit, both receiving something of value

Mixed economy* public sector*

Mixed economy combine some degree of government control or oversight. A mixed economy offers freedom to the producers and consumers while being able to step in when the system is being abused. The highest value in a mixed economy is balance.