1.2

Question 1

the 3 basic economic questions

Answer 1

1. what and how much to produce?
2. how to produce?
3. for whom to produce?

Question 2

resource allocation

Answer 2

assigning available choices about how the goods and services produced are to be distributed among the population (food or weapons)

Question 3

reallocation

Answer 3

changing the amounts of goods and services produces (more food, less weapons)

Question 4

overallocation

Answer 4

too many weapons

Question 5

underallocation

Answer 5

too few goods or services produced

Question 6

distribution of income or output

Answer 6

statistical measure of how many people earn or receive various amounts of income (3. question)

Question 7

redistribution of income

Answer 7

when distribution of income changes so different social groups now receive more or less than before

Question 8

economic systems

Answer 8

ways in which societies allocate their scarce resources and distribute goods and services that are produced with them; a way of rationing those resources

Question 9

economic systems =

Answer 9

rationing systems

Question 10

rationing

Answer 10

a method used to apportion or devide something between its interested users; a method used to make resource allocation and output/income distribution decisions

Question 11

centrally planned economy

Answer 11

-economic decisions are made by the government
-no private property; factors of productions are state owned
-government decides on the 3 economic questions
-resource ownership is public
-rationing system is non-price
-North Korea, Cuba

Question 12

free market economy

Answer 12

-resources are privately owned by people and firms
-all economic decisions are made by consumers and producers through price mechanism
-consumers drive the market with their demands
-profit motive and changing preferences of consumers decide allocation of resources
-resource ownership is private
-decision making is private
-rationing system is price
-USA, UK, Chile

Question 13

countries with mixed economy

Answer 13

the Netherlands, China, Hong Kong, Nordic countries

Question 14

price rationing

Answer 14

all economic decisions are made on the basis of prices of goods and services and resources that have been determined in markets

Question 15

non-price rationing

Answer 15

all decisions are made by use of methods that have nothing to do with prices determined in markets; the governement makes economical decisions by commands