Unit 2 Flashcards
Economic Systems
the way a nation uses its limited resources to fill its unlimited wants and needs
Basic economic questions
- What goods/services should be produced?
- What quantities of goods/services to produce
- How should goods/services be produced?
- For whom should the goods/services be produced?
Factors of Production/Economic Resources
- Natural Resources
- Human Resources
- Capital Resources
Natural Resources
things provided by nature
Human Resources
people that do work (labor)
Capital Resources
money, machines, equipment
Scarcity
a limited amount of something
The economic problem
Limited resources to meet unlimited wants and needs
Need
Thing necessary for survival
Want
Things not necessary for survival but make life better
Elements of an economy
Consumers
Business
Government
The circular flow of money
The circular flow of money
How money moves through an economy, from consumers to business to government
World economic systems
Traditional economy
Planned government
Market economy
Mixed economy
Traditional economy
Things are done the way they’ve always been done
Planned government
The government controls all resources and answer all economic questions
Market economy
All economic decisions are made by the market place by consumers
Mixed economy
A combination of all economic systems where consumers make economic decisions
Economic systems elements
Basic economic questions Factors if production/economic resources Scarcity The economic problem Needs vs wants Elements of an economy World economic systems
Business cycles
The general growth pattern of expansion and contraction that economies go through
Prosperity
The economy is experiencing high production and high spending
Recession
A slowdown in production that causes a decrease in spending
Depression
An extended period of time with low production and low spending and high unemployment
Recovery
Spending and production begin to increase and jobs are being created
Business cycles words
Prosperity
Recession
Depression
Recovery
Characteristics of private enterprise (mixed)
Freedom of ownership
Freedom of profit
Freedom of competition
Freedom of ownership
Individuals have the right to own and operate their own businesses
Freedom of profit
Individuals can earn and determine the use of the money they make
Freedom of competition
Individuals have the right to open and operate business offering a product similar to other businesses
Factors affecting profits,revenues, and expenses
Affecting profits
Affecting revenue
Affecting expenses
Affecting profits
Prices
Expenses
Competition
productivity - how efficiently work is done
Affecting revenues (sales)
Marketing-promotion and advertising
Competition
Product,service-quality
Operations
Affecting expenses
Cost of materials and utilities
Efficient use of resources
Quality of good/ service
Human resources (productivity)
Causes if economic decisions
Price Quality Customer service Warranties Need or want Persons economic position The economy Nature Competition
Domestic vs world trade
Domestic production
World trade
Free trade
Domestic production
Products are produced within boundaries of a country
World trade
Trading across borders to obtain products or services countries don’t produce with resources they possess
Free trade
Allows traders to interact without barriers imposed by the government
Benefits of free trade
Reduces prices
Increases variety of goods/services available
imports vs exports and the us economy
Imports
Exports
Balance of trade
Imports
Products/services brought in from other countries
Exports
Products/services sold to other countries
Balance of trade
Dollar amount of what a country imports is equal to the amount it exports
Trade deficit
Imports>exports
Trade surplus
Imports <exports
Balance of trade situations
Trade deficit
Trade surplus
