43 terms

CE.12 U.S. Economy

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US economy
mixed economy (primarily free market)
when government intervenes in a market economy
when the perceived benefits of a government policy outweigh the anticipated costs
characteristics of the US Economy
- free enterprise
- competition
- private property
- consumer sovereignty
- profit motive
- limited government involvement
a market exists when
whenever buyers & sellers exchange goods & services
free enterprise
markets are generally allowed to operate without undue influence from the government
prices
determined by supply & demand as buyers & sellers interact in the marketplace
private property
people can own property without undue interference from the government which provides a structure to define and enforce such property rights
profit motive
earnings after all expenses have been paid. Individuals have the opportunity to create a business and earn them
competition
rivalry between producers and/or sellers
results of competition
better quality goods & services at lower prices
consumer sovereignty
consumers determine through purchases what will be produced
price
the amount of money exchanged for a good or service
price is determined by -
the interaction of supply and demand
demand
the amount of a good or service that consumers are willing and able to buy at different prices during a particular time period
law of demand
consumers will buy more of a good or service at lower prices and less at higher prices
supply
the amount of a good or service that producers are willing and able to offer for sale at each price during a particular time period
law of supply
producers will produce more when they can sell at a high price and produce less at a low price
equilibrium price
the point where supply and demand meet. Everyone who wants to sell at that price can sell and everyone who wants to buy at that price can buy
types of business ownership
- proprietorship
- partnership
- corporation
proprietorship
form of business organization with one owner who takes all the risks and all the profits
partnership
form of business organization with two or more owners whi share the risks and the profits
corporation
a form of business organization that is authorized by law to act as a legal person regardless of the number of owners
In a corporation, owner liability is limited to -
investment
entrepreneur
person who takes a risk to produce goods and services in search of profit
effects of entrepreneurs
- increase competition
- often foster technological progress & economic growth
how entrepreneurs increase competition
by bringing new goods & services to market or delivering products in innovative ways
circular flow diagram
a way of visualing and categorizing activity in the economy
In the circular flow, consumers own -
resources used in production
In the circular flow, consumers use their income from selling resources to -
purchase products
In the circular flow, businesses buy resources to -
make products
In the circular flow, businesses use their profits from selling resources to -
buy more resources
when individuals spend money, their income is used to -
purchase goods & services
Government uses tax revenue to -
provide public goods and services
These help facilitate the exchange of money between savers and borrowers
private financial institutions
examples of private financial institutions
- banks
- credit unions
how do private financial institutions encourage saving
by paying interest on deposits
private financial institutions help provide capital so people/businesses can -
start or grow their businesses
Why do Virginia and the United States pursue international trade
to increase wealth
global economy
worldwide markets in which the buying and selling of goods and services by all individuals, nations & businesses takes place
why states and nations trade
- to obtain goods and services they cannot produce
- to obtain goods and services they cannot produce efficiently
- to seel goods and services
- to create jobs
innovations in technology
contribute to the global flow of information, capital, goods and services
using technology lowers -
the cost of production
An innovation in technology that contributes to the global flow of information
Internet
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