Econ Test #1 Flashcards
Scarcity
a fact of life. Human desires are unlimited, but resources to provide this are limited
Allocation of scarce resources
- Rationing- wartime, sales vaccines, etc.
- Lottery- prizes, sporting-event tickets, hunger games
- achievement -based- college and mission, job opportunities
- Need-based- financial aid, medical triage
- Brute force- war
- First come, first serve- black friday
Price gouging
occurs when merchants artificially raise the price of consumer goods that are in an emergency or national disaster. No settlement on an exact definition.
4 necessities of making a good or service
Land- all natural resources used to produce goods and services
Labor- the effort people are devoting to tasks and getting paid for it
Capital-
physical capital- human made objects used to create other goods
Human capital- knowledge or skill a worker has to create goods
Entrepreneur- a person who decides how to combine resources to create goods and services
Trade Off
All alternatives that we give up whenever we/a business of society chooses one thing over the other. We must make our own decisions in our own lives and the government.
PACED
P- state the Problem A- list the Alternatives C- identify the Criteria E- Evaluate the alternatives based upon the criteria D- make a Decision
Questions each economic system tries to answer
What goods and services should be produced
Ex- How much of the country’s resources should we devote to national defense, education, public health, and welfare, or consumer goods?
How should these goods and services be produced?
Ex- How to produce electricity? Use solar power, nuclear, coal, or oil?
Who consumes goods and services?
Ex- Who goes to concerts and who stays home?
Market economy
- no true real life example
- Market- a place where things are sold
- People make divisions in their own best interest and are able to act freely
- It is easier to specialize in one task or a few tasks very well than to learn them all
- Due to self interest and profit motive, individuals specialize and trade with others– need market to do this
Pros and cons of market economy
Pros- high individual freedom, adjust to change over time, limited government influence, variety of goods and services, high customer satisfaction
Cons- economy doesnt provide for everyone, may not provide basic goods and services, high uncertainty
Command economy
- North Korea, Cuba, etc.
- A central authority makes the decisions about the 3 economic questions. No competition, self interest, or freedom.
- Political system is communism, which uses authoritarian practices to require people to share wealth (socialism)
- Country produces heavy industry, which takes up many resources to leave not as quality resources leftover
pros and cons of command economy
Pros- can change economic focus quickly, Health and public services given to all (free)
Cons- ignore wants and needs of consumers, ppl want to fulfill production quotes- not high quality, requires a large group of decision makers, no innovation or efficiency.
Mixed Economy
Mixture of all economies(no single economic system has all the answers)
Laissez faire- no government intervention
Government needs to step in to fulfill some markets (US) by providing public goods
Traditional Economy
Underdeveloped
Use primitive and/or traditional tools and methods to harvest and hunt for food (inuit, amish)
wealth
Wealth - determined by many factors including scarcity, value, and utility.
Value
value- based on the scarcity and utility of that object. If the value is high, the wealth of one with it is higher as well.
