Chapter 1-2 Study Guide Flashcards
Choice
An act of selecting or making a decision when faced with two or more possibilities
Wants
an item we desire but that is not essential to survival
Needs
something like air, food, or shelter that is necessary for survival
Scarcity
Limited quantities of resources to meet unlimited wants
Shortage
a situation in which a good or service is unavailable
Factors of productions
Land, Labor, and Capital
Opportunity Cost
the most desirable alternative given up as the result of a decision
Traditional Economy
An economic system that relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it
Centrally Planned Economy
economic system where the central government makes all decisions on the production and consumption of goods and services
Market Economy
an economic system in which decision on production and consumption of goods and services are based on voluntary exchange in markets
Mixed Market Economy
market based economies systems with limited government involvement
Laissez-faire
The doctrine that government generally should not interfere in the marketplace
Socialism
a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society
Communism
a political system that is characterized by a centrally planned economy with all economic and political power power resting in the hands of the central government
What are the three economic questions a society must ask
- What goods and services should be produced
- How should these goods and services be produced
- Who consumes these goods and services
How does free-enterprise differ from laissez faire?
Free enterprise is purely about private decision making. Laissez Faire talks about how the government should generally not intervene.
Which economy is the least free in the world? Why?
The economy of north korea. North Korea has a command (centralized) economy. The state controls all means of production, and the government sets priorities and emphasizes in economic development.
Where does the US fall in the continuum of centrally planned economy and free market economy?
We are in the middle of both. We are a mixed economy. Private decisions are being made and a majority of natural resources are not owned by the government. However, we still have government regulations that the market must abide by.
Land
all natural resources used to produce goods and services
Labor
the effort a person devotes to a task for which that person is paid
Capital
any human resource that is used to create other goods and services
