Economic Terms

Question 1

What is supply?

Answer 1

The amount of a product available for sale

Question 2

How does a large supply usually affect price?

Answer 2

large supply = low price

Question 3

What does the word economy mean?

Answer 3

Everything having to do with making, buying, selling, and using goods and services

Question 4

Who owns businesses and property in a capitalist economy?

Answer 4

Individuals & groups of people

Question 5

What is the primary goal of businesses in a capitalist economy?

Answer 5

Compete and make as much money as possible

Question 6

What determines the price of goods and services in a capitalist economy?

Answer 6

Market forces like supply and demand

Question 7

What is the role of the government in a capitalist economy?

Answer 7

Stay out of the economy as much as possible (in pure capitalism the government would stay out entirely, but in most capitalist economies today the government does some regulation)

Question 8

What does competition mean?

Answer 8

There is more than one business producing and selling the same product

Question 9

What are 3 things businesses do to attract buyers when they have competition?

Answer 9

• offer lower price
• make a better product
• provide better service

Question 10

What prevents companies from making as much money as they want?

Answer 10

Competition

Question 11

What is a monopoly?

Answer 11

When one company has virtually no competition so they have complete control over how much is offered for sale

Question 12

What else can monopolies control by controlling the supply of a product?

Answer 12

The price

Question 13

What are 3 ways a company can get a monopoly?

Answer 13

1. Buy competitors’ companies
2. Drive competitors out of business by selling products cheaper because they can get raw materials cheaper
3. Sell products for less than it costs to produce the product until competitors go out of business and then raise the price

Question 14

When a company has a monopoly, do they have any incentive to improve their product?

Answer 14

No

Question 15

What 3 things are likely to be worse for consumers in a monopoly?

Answer 15

1. Price
2. Quality
3. Customer service

Question 16

When there is a monopoly for a product, what are the consumer’s only 2 options if they are not happy with a product, it’s price, or customer service?

Answer 16

1. buy it anyway

2. Do without the product

Question 17

What are government regulations?

Answer 17

Rules the government makes that businesses have to follow

Question 18

Why do some feel government regulation of business is necessary?

Answer 18

To protect workers and consumers from suffering

Question 19

Why do many businesses not like government regulations?

Answer 19

They cause them to make less money

Question 20

How does a low supply usually affect the price of a product?

Answer 20

Low supply= high price

Question 21

Supply and price have a _________ relationship.

Answer 21

Inverse (which means the same as opposite) - in other words if supply goes up, price goes down and vice versa

Question 22

How did the industrial revolution affect the supply of products?

Answer 22

Supply increased a lot

Question 23

If the supply of products increases, what does the price do?

Answer 23

Decreases

Question 24

If the supply of products decreases, what does the price of products do?

Answer 24

The price increases

Question 25

How did the price of products change because of the industrial revolution?

Answer 25

Price decreased

Question 26

What kind of economy does the US have?

Answer 26

Capitalist