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.
utility
utility - how useful it is. The more useful, the more value it has.
households in services market
Households are primarily buyers in the goods and services market
households in the labor market
Households are primarily sellers in the labor market
firms in the services market
Firms are mainly sellers in the goods and services market
firms in labor market
Firms are mainly buyers in the labor market.
