Lesson 8 pg.28-29 Flashcards
What is the production of goods the result of?
> The production of goods is the result of the combination of certain resources.
Economists call these resources the factors of production.
How do economists usually divide the factors of production?
> Economists usually divide the factor of production into four main categories: natural resources, labor, capital, and entrepreneurship
What do economists also list as a fifth factor of production? Why?
Efficient production depends upon the intelligent blending of these resources. For this reason, some economists also list information as a fifth factor of production.
Describe the new cyber economy
The new cyber economy, found chiefly in the developed nations, emphasizes the role that information plays as people try to combine the traditional four factors of production (natural resources, labor, capital, entrepreneurship) in the best ways possible.
Are the four factors of production scarce or abundant?
The four factors of production are scarce, even in the most prosperous regions.
Define and describe the traditional economy
> In many of the cultures of ancient history, as well as in some underdeveloped places yet today, we find the traditional economy.
traditional economy - system in which decisions involving the production, distribution, and consumption of goods are based upon custom, heredity, and caste
people are expected to live as their ancestors did; consequently, there is usually little opportunity for one to improve his lot in life
Describe the command economy
> command economy, also known as planned or directed economy
command economy - system in which a centralized authority determines the production and distribution of goods and services as well as things like savings, investments, and prices
government controls factor of production
decisions made for the people instead of by the people
Describe the free enterprise economy
> free enterprise economy - system in which people are free to make their own economic choices
free enterprise economy, also known as private capitalism or market economy
private individuals and businesses are allowed to own property and make personal choices free from governmental interference and excessive regulations
prices for goods and wages paid for labor are set by competition in market instead of by tradition or law
Describe mixed economy
> when system combines good measure of free enterprise in some areas with heavy state regulations in others, the result is a mixed economy
