unit 3 epf


Factors of production: 

  • Land → all natural resources such as minerals or water

  • Labor → the work and people that go into producing services)

  • Capital → tools or machinery used to produce the goods and services

  • Entrepreneurship → using a combination of land, labor and capital in order to make profit

Types of economies:

  • Traditional → based on traditional beliefs and customs and usually relies on things like subsistence farming (families producing goods for their own use)

  • Command → the government controls the level of production and its prices

  • Market → economic decisions and pricing of goods depends on interactions between individuals and businesses (supply and demand)

  • Mixed → combination of capitalism and socialism 

Types of businesses:

  • Limited liability → owners are not responsible for the company’s losses or each others’ actions

  • Unlimited liability → owners are responsible for the company’s losses, partners are equally liable

  • Partnership → two or more people coming together to pursue a company for mutual benefit 

  • Corporation → business entity that is separate from its owners and has the purpose of making profit

    • Conglomerate → a corporation made up of different businesses who all serve different purposes (ex. Disney)

  • Co-operative/Co-Ops → the owners buy their own goods and come together for mutual benefit

  • Franchise → a business (franchiser) allows a party (franchisee) to use its business model in order to expand the company or business

Formulas:

  • Total cost → what is paid by producers to provide their goods and services 

    • Fixed costs + variable costs

  • Profit → how much money is actually made

    • Revenue - (minus) costs

  • Revenue → how much money is made without regarding costs

    • Price x (times) quantity sold

  • Break-even point → when revenue is the same amount as expenses/costs

    • Fixed costs / (revenue - cost to make one unit)

    • Break-even quantity → how many goods need to be sold to reach the break-even point 

      • Fixed costs / (price - variable costs)

Vocabulary:

  • Consumer sovereignty → what customers buy or don’t buy influences what goods get produced 

  • Merger → two firms coming together to form one single firm 

  • Sole-proprietorship → a business owned and operated by one person