Unit 2

Question 1

means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country.

Answer 1

ECONOMIC SYSTEM

Question 2

Economic systems regulate the?

Answer 2

factors of production:

including land, capital, labor, and physical resources.

Question 3

encompasses many institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.

Answer 3

ECONOMIC SYSTEM

Question 4

TYPES OF ECONOMIC SYSTEMS

Answer 4

1. Traditional economic system
2. Command economic system
3. Market economic system
4. Mixed system

Question 5

They use barter instead of money.

Answer 5

1. TRADITIONAL ECONOMIC SYSTEM

Question 6

is a system that relies on customs, history, and time-honored beliefs.

Answer 6

1. TRADITIONAL ECONOMIC SYSTEM

Question 7

Societies with traditional economies depend on?

Answer 7

agriculture, fishing, hunting, gathering, or some combination of them.

Question 8

there is a dominant centralized authority that controls a significant portion of the economic structure and government makes all economic decisions.

Answer 8

2. COMMAND ECONOMIC SYSTEM

Question 9

also known as _______________ the command economic system is common in communist societies since production decisions are the preserve of the government

Answer 9

planned system

Question 10

Advantages of Command Economic Systems

Answer 10

• If executed correctly, the government can mobilize resources on a massive scale. This mobility can provide jobs for almost all of the citizens.
• The government can focus on the good of the society rather an individual. This focus could lead to a more efficient use of resources.

Question 11

Disadvantages of Command Economic Systems

Answer 11

• It is hard for the central planners to provide for everyone’s needs. This forces the government to ration because it cannot calculate demand since it sets prices.
• There is a lack of innovation since there is no need to take any risk. Workers are also forced to pursue jobs the government deems fit.

Question 12

these are based on the concept of free markets. In other words, there is very little government interference.

Answer 12

3. MARKET ECONOMIC SYSTEM

Question 13

There is no government intervention in a pure market economy which is also known as?

Answer 13

(“laissez-faire”)

Question 14

Advantages of a Free Market Economy

Answer 14

• Consumers pay the highest price they want to, and businesses only produce profitable goods and services. There is a lot of incentive for entrepreneurship. This leads to the most efficient use of the factors of production since businesses are very competitive.
• Businesses invest heavily in research and development. There is an incentive for constant innovation as companies compete to provide better products for consumers.

Question 15

Disadvantages of a Free Market Economy

Answer 15

• Due to the fiercely competitive nature of a free market, businesses will not care for the disadvantaged like the elderly, disabled, and those who lack skills. This leads to higher income inequality.
• Since the market is driven solely by self-interest, economic needs have a priority over social and human needs like providing healthcare for the poor. Consumers can also be exploited by monopolies.

Question 16

a combination of different types of economic systems. This economic system is a cross between a market economy and command economy.

Answer 16

4. MIXED SYSTEM

Question 17

In the most common types of mixed economies, the market is more or less free of ___________ ownership except for a few key areas like transportation or sensitive industries like defense and railroad.

Answer 17

government

Question 18

Advantages of Mixed Economies

Answer 18

• There is less government intervention than a command economy. This means that private businesses can run more efficiently and cut costs down than a government entity might.
• The government can intervene to correct market failures.
• Governments can create safety net programs like healthcare or social security.
• In a mixed economy, governments can use taxation policies to redistribute income and reduce inequality, as well as provide for public goods like roads, community centers, and schools.

Question 19

Disadvantages of Mixed Economies

Answer 19

• There are criticisms from both sides arguing that sometimes there is too much government intervention and sometimes there isn’t enough.
• A common problem is that the state run industries are often subsidized by the government and run into large debts because they are uncompetitive.

Question 20

occurs whenever quantity demanded is greater than quantity supplied at the market price.

Answer 20

shortage

Question 21

More people are willing and able to buy the good at the current market price than what is currently available.

Answer 21

shortage

Question 22

When a shortage exists, the market is not in _________

Answer 22

equilibrium.

Question 23

At equilibrium, the quantity demanded _____ the quantity supplied at the market price

Answer 23

equals

Question 24

CAUSES OF SHORTAGES

Answer 24

1. Increase in demand
2. Decrease in supply
3. Government intervention

Question 25

It means that the demand for a good or service is greater than the availability of the good or service.

Answer 25

Scarcity

Question 26

Scarcity is important for understanding how goods and services are ________

Answer 26

valued.

Question 27

The commodities may be divided into two the

Answer 27

Goods and Services.

Question 28

The act of making goods and services

Answer 28

Production

Question 29

Act of using the goods and services to satisfy human wants

Answer 29

Consumption

Question 30

the theory of exponential population and arithmetic food supply growth.

Answer 30

The Malthusian Theory of Population

Question 31

The Malthusian Theory of Population was proposed by

Answer 31

Thomas Robert Malthus

Question 32

He believed that a balance between population growth and food supply can be established through preventive and positive checks.

Answer 32

Thomas Robert Malthus

Question 33

MAJOR ELEMENTS OF THE MALTHUSIAN THEORY

Answer 33

* Population and Food Supply * Checks on Population * Positive Checks * Preventive Checks

Question 34

Food supply increases at a slower rate than the population. That is, the food supply will be limited in a few years. The shortage of food supply indicates an increasing population.

Answer 34

* Population and Food Supply

Question 35

o When the increasing population rate is greater than the food supply, __________ exists.

Answer 35

disequilibrium

Question 36

o When the increasing population rate is greater than the food supply, disequilibrium exists. As a result, people will not get enough food even for survival. People will die due to lack of food supply.

Answer 36

* Checks on Population

Question 37

o Nature has its own ways of keeping a check on the increasing population. It brings the population level to the level of the available food supply.

Answer 37

* Positive Checks

Question 38

The positive checks include?

Answer 38

famines, earthquakes, flood, epidemics, wars, etc.

Question 39

o The preventive measures such as late marriage, self-control, simple living, help to balance the population growth and food supply.

Answer 39

* Preventive Checks