21 terms

CE.11 Economic Principles & Systems

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scarcity
the inability to satisfy all wants at the same time
Because all resources and goods are limited,
choices must be made
whenever individuals make a choice, two choices are being made because -
when you choose to do one thing, you are also choosing NOT to do something else
resources
factors of production used in the production of goods and services
4 kinds of resources
- human
- natural
- capital
- entrepreneurship
choice
selecting an item or action from a list of possible alternatives
opportunity cost
what is given up when a choice is made (the second best alternative)
production
the combining of resources to create goods and services
these determine what is produced
- consumer preference
- available resources
consumption
using goods and services
these determine what is purchased
- consumer preference
- price
the key factor in determining the type of economy a country has
the extent of government involvement
the greater the amount of decision making that is left to the individual, the closer the system is to -
a free market system
the greater the amount of decision making that is left to the central authority, the closer the system is to -
a command system
basic economic questions
- What will be produced?
- How will it be produced?
- For whom will it be produced?
4 types of economy
- traditional
- mixed
- free market
- command
traditional economy
- based on custom and historical precedent
- people often perform the same work as previous generations
free market economy
- private ownership
- profit motive
- competition
- consumer sovereignty
- individual choice
- minimal government involvement
command economy
- central ownership
- centrally-planned
- lack of consumer choice
mixed economy
- individuals and businesses are decision makers for the private sector
- government is decision maker for the public sector
most economies today -
are mixed economies
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