American Free Market Economy Flashcards
what is the study of economics?
The study of consumer choices, resources, and markets
what is scarcity?
lack of resources
what does it mean to make a choice?
selecting an item or action from a set of alternatives
place that goods or services are bought or sold
merketplace
what is opportunity cost?
what is given up in a choice
what are the 4 types of resources?
Natural, human, capital, entrepreneurship
what is the definition of resource
factors of production, like land, labor, or money.
items found in nature
natural resources
individuals who provide the labor
human resources
things owned by the business, such as buildings, equipment or land
capital resources
the people who take risks to start a business in search of a profit
entrepreneurship
what is production?
Combining resources in the process of creating goods
what is consumption?
using the goods produced
determined by resources available and by what consumers want
Production
What are the 3 economic questions that all countries must answer to determine the type of economic system the country has?
What will be produced?
How will it be produced?
For whom will it be produced?
leads every country to make decisions about use of its resources
Scarcity
what are the 4 types of economic systems?
traditional economy
free market economy
mixed economy
command economy
each type of these have varying amounts of government control
economic systems
what is a traditional economy?
decisions made based on custom or tradition
common for people to do similar work as their parents
less demand of resources
what is a free market economy?
decisions largely made by individuals and business owners
little government involvement
private ownership of resources
businesses make decisions based on profit motive or money
competition
Control is in the hands of consumers because their purchases determine what is produced
consumer sovereignty
what is command economy?
decisions are made by a central organization usually the government
resources and property are owned by government
lack of consumer choice
What is a mixed economy?
more government involvement than free market but less than command
includes private and public sectors
made of public and private sectors
What are the public and private sectors?
private sector- businesses make decisions
public sector- government makes decisions
what type of economy does the United States have?
mixed economy
what are free markets in the US economy?
where goods and services are bought and sold
operate with little interference from the government
what are the five distinct characteristics of the US economy?
Free markets
Private property
profits
competition
consumer sovereignty
what is private property?
individuals and business may own the land, buildings and/or resources in order to produce goods and services with little government interference
how does the interaction of supply and demand determine price?
If supply is low and demand is high for a good or service, then the price goes up. If the demand is low but the supply is high then the price will be low because the producer will want to incentive consumers to buy it or increase demand for it.
what are the 3 types of business structures?
proprietorship
partnership
corporation
person who takes the risk to start the business in search of profit
entrepreneur
what is a proprietorship?
Business with one owner
what is a partnership?
Two or more owners
what is a corporation?
Acts as a legal person regardless of number of owners
not responsible if the buissness fails
