ch2 the three economic problems Flashcards
“what to produce”
types and quantity of goods and services to produce
“how to produce”
considering production factors
“for whom to produce”
distribution of output
market economy
ownership: mostly privately owned
resource allocation: directed by market price
income distribution: distributed by market mechanism
decision making bodies: consumers and firms made decisions
planned economy (command economy)
ownership: mostly government owned
resource allocation: directed by government
income distribution: distributed by government
decision making bodies: follow government plans
mixed economy consist of:
by market, by government, and by customs and traditions
three main types of economic activities:
production, consumption, exchange
two basic economic units:
firms, households
production
。process of turning inputs to outputs
consumption
。process of satisfying wants from goods and services
exchange
。buying and selling goods/ factor services
firms
。employ factor service
。produce and sell goods and services
households
。provide factor service
。buy goods and services from firms
private property rights
。exchange can only take place when the owner of good is identified, or else exchange cannot take place
。PPR is the basic requirement for exchange
。PPR rights:
1) exclusive right to use
2) exclusive right to derive income from the goods and assets
3) exclusive right to transfer
common properties
。economic goods that have no owner
。no one can exclude any other from using or receiving income from or transfering it
。government properties may not be common properties
。PPR -> price competition
。lack of PPR (common properties) -> non-price competition
