Economics And Choice

Question 1

What is an Economic System?

Answer 1

The way a society uses its scarce resources to satisfy its people’s unlimited wants

Question 2

What is competition?

Answer 2

Involves all the actions sellers do to get buyers to purchase their products

Question 3

What is a Laissez Faire?

Answer 3

Principle that government should not interfere in the market place
“Leave it alone” or “hands off”

Question 4

What does privatize mean?

Answer 4

To change from government or public ownership to private ownership

Question 5

What does nationalize mean?

Answer 5

To change from private ownership to government or public ownership

Question 6

What is product market?

Answer 6

Market for goods and services

Set of activities in which people buy goods and services

Question 7

What is specialization?

Answer 7

A situation in which people concentrate their efforts in activities they do best.

• It allows people to trade what they can most efficiently produce
• Removes need for households to be self sufficient
• allows households to trade for what they need

Question 8

What is voluntary exchange?

Answer 8

A trade in which both traders believe what they are getting is worth more than what they are giving up

• Based upon self interest
• Buyers seek products and services that satisfy their wants and sellers seek profit

Question 9

What is a command economy?

Answer 9

The central government makes ALL decisions in the production and consumption of goods and services

Question 10

What are positive aspects of a command economy?

Answer 10

The government is able to distribute resources equally among society

Question 11

What are negative aspects of a command economy?

Answer 11

Inefficient because

• Unfair, flawed government decisions
• lack of motivation of people to work
• Lack of individual freedom

Question 12

What is a market economy?

Answer 12

Decisions on production and consumption of goods and services are based on voluntary exchange in markets

Question 13

What are positive aspects of a market economy?

Answer 13

Individual freedom to act in ones own self interest

-most efficient use of resources

Question 14

What are negative aspects of market economy?

Answer 14

Some individuals act destructively toward themselves and toward others

• Uneven distribution of resources among different groups in society
• Some needs not met, if they don’t coincide with the needs f the majority

Question 15

What is a traditional economy?

Answer 15

Relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

Question 16

Positive aspects of traditional economy?

Answer 16

Clearly Answers the three economic questions (who, how, what)
-economic decisions are based on tradition and custom

Question 17

Negative aspects of traditional economy?

Answer 17

Less productive because they resist change and tradition and custom flood the job market
-fewer people are able to attain wealth

Question 18

What is another name for a command economy?

Answer 18

Communism
Socialism
Democratic socialism

Question 19

Where is the real power found In a market economy?

Answer 19

It is by the consumers
-Consumer Sovereignty
Customers have ultimate control over what is produced Bc they are free to buy and reject what they want.

Question 20

In which type of economy do producers and consumers drive the economy?

Answer 20

Market economy Bc they can do what they want

Question 21

Who was Karl Marx?

Answer 21

German philosopher, historian, economist
AKA the “father of communism”
Influenced the Russian Revolution of 1917 and Chinese Revolution in 1949

Question 22

What was Karl Marx’s theory?

Answer 22

He thought there were 2 social classes
(Worker and Owner)
-owners exploited workers
XKeep wages low
Xsell products and high prices
-Tension would rise between worker and owner and overtime the workers would revolt and create a new society without classes. 
(Co wrote the communist Manifesto)

Question 23

How many pure market economies exist today?

Answer 23

Few to none

Question 24

What is a mixed economy?

Answer 24

An economic system that has elements of traditional, command, and market economies

• is also the most common economy today
• Often emphasize one type of economy more than the others

Question 25

What is a global economy?

Answer 25

All economic interactions that cross international borders

Question 26

What is the Circular Flow model?

Answer 26

It visualizes how all interactions occur in a market economy
Two decision makers
-Households
-Businesses
Shows the two markets in which households and businesses meet.

Question 27

What is a factor market?

Answer 27

Market for the factors of production.

-businesses purchase the factors they need from the factor market