Economics and Choice

Economics Systems

• Types:
  • Socialism
  • Communism
  • Capitalism

Importance of Economics

• Study of economic and government principles is essential to understand societal dynamics.

Market Pricing

• Prices in a free market are determined by:
  • Law of Supply and Demand

Characteristics of Free Markets

• Key characteristics include:
  • Innovation
  • Efficiency
  • Competition

Economic Systems Defined

• Traditional Economy:
  • Family-based, resistant to change, low living standards, rural.
• Command Economy:
  • Central planning, limited personal freedom, government controls production, often leads to shortages.
• Market Economy:
  • Governed by supply and demand, minimal government intervention.
• Mixed Economy:
  • Combination of free market with some government regulation.

Factors of Production

• Four factors include:
  • Land
  • Labor
  • Capital
  • Entrepreneurship

Opportunity Cost

• Definition: What is sacrificed to gain a benefit.

Cost-Benefit Analysis

• A method weighing the benefits of an action against its costs to evaluate economic choices.

Production Possibility Curve (PPC)

• Illustrates efficiency and opportunity cost in production decisions.

Fundamentals of Market Economy

1. Private Property
2. Specialization
3. Consumer Sovereignty
4. Competition
5. Profit
6. Voluntary Exchange
7. Government Involvement

Market Failure

• Occurs when goods and services fail to reach customers without government intervention for correction.

Public Goods

• Goods that cannot be efficiently provided by the market and typically funded by taxes.

Free Rider Problem

• Scenario where individuals benefit from resources, goods, or services without paying for them.