Nature and Purpose of Economic Activity Flashcards
Economic Problem Definition
Unlimited Wants and limited Resources.
Central Purpose of economic activity definition
The production of goods and services to satisfy needs and wants.
Three Key Economic Decisions
What to Produce.
How to Produce.
Who is to benefit from the Goods and Services produced.
First Economic Decision Reasoning
What to Produce
Economic incentives provide economic agents with the information required to tell them what goods and services to produce.
Second Economic Decision Reasoning
How to Produce
Firms will combine the factors of production in order to provide a good or service.
Third Economic Decision Reasoning
For whom to Produce
In a free market economy firms produce according to demand and supply.
Economic Agents Definition
The individuals and firms that partake in economic activity, the demand and supply of goods and services.
Free market economy definition
One where firms decide what goods and services to produce with limited intervention from the government.
Free Market Economy Examples
UK, USA
Planned Economy Definition
One where the government decides what to produce.
Planned Economy Examples
USSR, North Korea
