Factors of production , decisions Flashcards
What are the two types of economies?
Market economy and Command economy
The market economy is driven by individual choices and profit motives, while the command economy is controlled by government decisions.
Define a market.
A network of buyers and sellers exchanging goods or services for an agreed price
Markets can exist for both goods and services, as well as for resources.
What characterizes a market economy?
Decisions made by individuals and profit-driven firms, private ownership of resources, and lack of government intervention
The market economy is motivated by self-interest.
What characterizes a command economy?
Government entities make all decisions, resources are government-held, and little individual choice
There is a high degree of government intervention in a command economy.
What is a mixed economy?
A blend of market and command economies
It arises due to the severe economic and social repercussions of not intervening in the economy.
What influences what is produced in an economy?
Government through subsidies, tax incentives, and laws
The government can encourage or discourage production of certain goods.
Fill in the blank: The government can affect the quantity of a good produced through _______.
tax, policy, subsidies, restrictions
These methods can encourage competition among producers.
How can the government influence how production occurs?
Through laws affecting the cost of factors of production (FOPs) like minimum wage and environmental protection acts
These laws can change how FOPs are utilized in the production process.
How does the government affect the distribution of production?
Through policies that change the share of production individuals receive
This can make distribution more equitable or less so, such as using a progressive tax system.
