Unit 4 - economic agents Flashcards
What does demand refer to in economics?
The quantity of a good or service consumers are willing and able to purchase at different price levels.
How does price affect demand?
Higher prices generally decrease demand, while lower prices increase it, assuming other factors remain constant.
What is supply in economic terms?
The quantity of a good or service that producers are willing and able to sell at various prices.
How does price affect supply?
As prices rise, producers are usually willing to supply more; as prices fall, supply tends to decrease.
Define scarcity.
The fundamental economic problem where resources are limited and cannot satisfy all human wants and needs.
What do individuals and societies do because of scarcity?
They prioritize their needs and make decisions on the best use of resources.
What are resources in economics?
Inputs used to produce goods and services, classified into land, labor, capital, and entrepreneurship.
What are the four categories of resources?
- Land
- Labor
- Capital
- Entrepreneurship
What is the difference between wants and needs?
Wants are desires for non-essential goods and services; needs are essentials required for survival.
How do wants and needs influence consumer behavior?
Understanding wants and needs helps predict consumer behavior and resource allocation.
What is the circular flow of income model?
It illustrates how money moves through an economy between households, businesses, government, and the foreign sector.
What are injections in the circular flow of income?
Additions to the circular flow, including government spending, investment, and exports.
What are leakages in the circular flow of income?
Withdrawals from the circular flow, including savings, taxes, and imports.
What are the factors of production?
- Land
- Labor
- Capital
- Entrepreneurship
What does land encompass in economics?
All natural resources found on and within the earth, such as forests, minerals, water, oil, and land space.
What is the role of labor in production?
Labor transforms raw materials into goods and services.
Define capital in economic terms.
Man-made resources that aid production, such as machinery, tools, factories, and technology.
What is entrepreneurship?
The initiative and risk-taking abilities of individuals to organize the other three factors of production and innovate.
What characterizes a market economy?
Decisions regarding investment, production, and distribution are guided by price signals created by supply and demand.
List features of a market economy.
- Private Ownership
- Profit Motive
- Price Mechanism
What defines a command economy?
The government controls and regulates the means of production, deciding what to produce, how to produce it, and who receives the goods.
List features of a command economy.
- Government Ownership
- Central Planning
- Social Goals
What is a mixed economy?
An economic system that combines elements of both market and command economies.
List features of a mixed economy.
- Dual Ownership
- Government Regulation
- Balance of Efficiency and Equality
What is resource allocation in a command economy?
The process by which the government controls and distributes resources to meet national goals.
What is the role of a central planning authority in a command economy?
Determines the allocation of resources across sectors.
What are production targets and quotas in a command economy?
Specific production goals set by the government for each industry.
How are prices determined in a command economy?
Prices are often set by the government rather than determined by market forces.
What is the focus of resource allocation in a command economy?
Meeting national objectives and social welfare rather than profitability.
What are the limitations of resource allocation in a command economy?
Can lead to inefficiency and lack of innovation due to absence of competition.
