Economic Systems Flashcards
Characteristics of planned economy
Government makes all economic decisions, everyone is working class, only necessities produced, operate on social interest, income equally distributed
Characteristics of market economy
No government sector, everything privately owned, high competition, capital over labour, high technology, profit incentive, not everyone receives essentials, cheaper resources to maximise profit
Traditional economy characteristics
No money, self-sufficient, low technology, no specialisation, no surplus,mostly primary production
Types of Resources
Land, labour, capital, enterprise
Circular flow of income sectors
Firms, households, financial, government, overseas
Economic problem
Inability to satisfy unlimited wants with limited resources
Opportunity cost
What you sacrifice for something else
Other names for market
Capitalism, unplanned
Economic questions
What/how/how much/for whom to produce
Factors affecting supply
Natural disasters, seasons, technology, price of resources
Factors affecting demand
Season, income, advertising, complementaries, substitutes, population, tastes/preference
Investment
Money injected into firms from the financial sector, lent for future benefit
Taxation
A leakage of income from the households to the government
Government spending
An injection of spending on essential goods and services (e.g. Health)
Characteristics of wants
Recur, unlimited, change
Good
Tangible item that is sold
Service
Intangible concept that is sold
Resource
Anyone or anything used to make a product
Barter
A traditional economy that uses trade for any surplus
Subsistence
A traditional economy that is completely self-sufficient
When did life expectancy changes to 39 years for Burundian men?
2004
Economics
The study of how to satisfy unlimited wants with limited resources
What are the types of advertising?
Persuasive, informative
Consumer
Anyone who uses products
Consumer sovereignty
Customers decide what is sold
Equilibrium
The point where the demand and supply curves meet
Scarcity
The economic problem of having unlimited wants and not enough resources to satisfy them
Leakages
Money that is taken from the economy
Injections
Money pit back into the economy
How does market answer the economic questions?
What the customers want (consumer sovereignty)
Most cost effective production
Amount determined by price mechanism
For the willing and able
Advantages of planned economy
Labour over capital, low/no unemployment, everyone receives essential goods, income equality,
Advantages of unplanned economy
High tech, competition
What happens to the supply curve when it increases?
Shifts left
What happens to the demand curve when it increases?
Shifts right
Informative advertising
Tells consumers about the product
Persuasive advertising
Convinces consumers to buy the product
Law of supply
As supply increases, price decreases
Law of demand
As demand increases, so does the price
Price mechanism
The relationship between demand and supply
What decreases supply?
Increased price of resources, natural disasters, off-season
What increases supply?
Technology advances, decreased price of resources, season
What increases demand?
Increased population/income, decreased price of substitutes/complementaries, season, preference/taste, successful advertising,
How does the PPC show opportunity cost?
As one product increases production, the other must be sacrificed
What happens at any point below the PPC?
Resources are not being used to their full potential
What happens in the PPC shifts to the right?
Resources have increased, therefore more can be produced
Law of increasing cost
Some resources are more suited to producing other products, therefore increasing the opportunity cost
Supply
The amount of a product producers are willing to make for a particular price
Demand
The amount of a product consumers are willing to buy at a certain price
What techniques are used in advertising?
Jingles, mascots, patriotism, promotions, repetition, association, colour, experts, celebrity endorsement, memory recall, nostalgia, mascu/femininity, mystery,
What forms of advertising are there?
Flyers, posters, billboards, product placement, sponsorship, pop ups, mass media, YouTube, social media, radio, to broadcast, signs, magazines, videos, newspaper, visual aid,
How do planned economies answer the economic questions?
Government decides what and how to produce
Government makes 5 year plan
Produce made for everyone
What law explains curved PPC models?
Law of increasing (opportunity) cost
