free market economy
a market system that is allowed to operate without alot of influence from the government
individuals have the right to own personal property as well as means of production without a lot of interference from the government.
earnings after all expenses have been paid
rivalry between producers and/or between sellers of a good or service. Competition usually results in better quality goods and services at lower prices.
through their purchases, consumers determine what goods and services will be produced.
a type of business organization with one owner who takes all the risks and all the profits.
a type of business organization with 2 or more owners who share the risks and all the profits.
a form of business organization that is authorized by law to act as a legal entity regardless of the number of owners. Owners share the profits. Owner liability is limited to the amount of their investment (can only lose the amount of money you put into the business)
a person who takes a risk to produce goods and services in search of profit.
the inability to satisfy all wants at the same time. All resources and goods are limited. Requires that choices be made.
factors of production that are used in the production of goods and services. Types of resources are natural, human, capital and entrepreneurship
selection of an item or action from a set of possible alternatives. Individuals must choose or make decision about desired goods and services because these goods and services are limited.
what is given up when a choice is make - ex. the highest valued alternative forgone. Individuals msut consider the value of what is given up when making a choice. (pick the Hershey chocolate instead of the Krackle, the Krackle is your opportunity cost)
amount of money exchanged for a good or service. Interaction of supply and demand determines price. Price determines who acquires goods and services.
things that incite or motivate. Incentives are used to change economic behavior. (20% off, buy one get one free sales etc..)
Supply and Demand
interaction of supply and demand determines price. Demand is the amount of a good or service that consumers are willing and able to buy at a certain price. Supply is the amount of a good or service that producers are willing and able to sell at a certain price.
combining of human, natural, capital and entrepreneurship resources to make goods or provide services. Resources available and consumer preferences determine what is produced.
the using of goods and services. Consumer preferences and price determine what is purchased and consumed.