Topic 1: Economies: their similarities and differences

Question 1

What is a pure mkt economy?

Answer 1

all major econ decisions are made by individuals and private firms motivated by self-interest without the government intervention

Question 2

What is a centrally planned economy?

Answer 2

Gov planners make econ decisions. individual choices have little role in influencing economic outcomes. There is public ownership of factors of prod’n which allows the government to allocate resources as it sees fit.

Question 3

define product market

Answer 3

the interaction of demand for and supply of the outputs, G&S

Question 4

What is a market

Answer 4

a network of buyers and sellers seeking to exchange a particular product at a certain price

Question 5

define price mechanism

Answer 5

is the process by which the forces of S&D interact to determine the mkt price at which G&S are sold, as well as how much of it is produced (Q)

Question 6

define factor market

Answer 6

is a market for any input into the prod’n process (land, labour, capita, enterprise)

Question 7

what are the characteristics of an economy?

Answer 7

-private ownership of property
-consumer sovereignty
-freedom of enterprise
-competition

Question 8

define private ownership of property

Answer 8

Individuals possess the right to own resources, generate income, and accumulate wealth. They can also sell or transfer ownership of their property as they see fit.

Question 9

define consumer sovereignty

Answer 9

consumer sovereignty is when market demand collectively shapes production and quantity

Question 10

define freedom of enterprise

Answer 10

the unrestricted right of individuals and businesses to engage in economic activities and pursue business ventures without gov intervention

Question 11

define competition

Answer 11

competition in a mkt econ drives businesses to lower prices of their G&S and enhance quality to boost sales to customers

Question 12

define mixed economy

Answer 12

a mixed economy combines mkt forces and gov decisions to determine prod’n and distribution

Question 13

why do governments intervene in the market economy?

Answer 13

Resource allocation:
- provide important G&S that would not be provided by the private sector
- restrict prod’ of harmful G

Income distribution:
- create a fairer society

Economic stability:
- smooth out sharp fluctuations in the economic cycle
- ensure stability in the econ and financial system

Question 14

examples of gov intervention in Australia’s economy:

Answer 14

public ownership
regulation
social welfare payments
progressive taxation

Question 15

define merit goods

Answer 15

Merit G are G&S that are underproduced by the private sector due to insufficient perceived value by individuals

Question 16

define quality of life

Answer 16

the overall well-being and satisfaction of individuals within a society. involved factors like physical health, education, income, access to basic services, social relationships, and overall life satisfaction

Question 17

define human development index (HDI)

Answer 17

a measure created by the UN that evaluates econ development by considering life expectancy at birth, levels of education, and material living standards (measures by gross national income per capita)

Question 18

define distribution of income

Answer 18

the way in which the total income generated within an econ is divided among different individuals or households.

Question 19

define environmental sustainability

Answer 19

responsible use of natural resources (land) and the protection of ecosystems to ensure that present and future generations can enjoy a healthy and balanced environment.

Question 20

what are some big environmental problems currently in Australia?

Answer 20

• poor record of preserving biodiversity
• management of water sources (climate change)
  carbon emissions

Question 21

define the role of the government