5 MT Flashcards
market signals
a sign used by producers and consumers to determine how much of a good to buy or sell at a given price and time
nondurable good
a good that has a life expectancy of less than three years
durable good
a good that has a life expectancy of more than three years
black market
an illegal, underground system for the exchange of goods, developed to avoid governmental regulations
private sector
that part of an economy controlled by private individuals, businesses, and organizations
public sector
that part of an economy controlled by national, state, and local governments
profit motive
the desire to work to improve one’s economic situation
depreciation
the diminishing value of the goods that is caused by wear and time
profit
the excess of the total revenue paid by buyers for goods over the seller’s total expense of producing goods
opportunity costs
the value of the best alternative that is forgone when a different alternative is taken
traditional economic systems
are based heavily on tradition causing the society’s wants to rarely change and for there to not be much need for anyone to make important economic decisions. Production tehcnology rarely changes, and these societies are more prone to suffering from natural disasters
the difference between free market economies and command economies is
how much fo the economy is run by the private sector and how much run controlled by the public sector
free market economy
the interaction of demand and supply determines what shall be produced and in what quantity
the distribution of goods is decides by consumers. people spend their money to buy what they want
prices are efficiently determined through equilibrium between supply and demand
command economy
a central authority determines how much of every good will be produced
the central authority determines either directly or indirectly what goods will bee made available and to whom
prices are fixed by the central authority. this control frequently results in surpluses and shortages of goods
wage of management
the cost of hiring managers to run a business; a cost of labor that small-business owners often fail to account for
