Questions and Answers
What are the three basic economic questions?
What is an economic system?
The structure of methods and principles a society uses to produce/distribute goods/services.
What are factor payments?
The income people receive in return for supplying factors of production.
What is profit?
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What is a traditional economy?
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What is a command economy?
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What is a market economy?
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What is a mixed economy?
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What are common economic social goals?
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What is the standard of living?
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What is innovation?
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What is a safety net?
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Study Notes
Basic Economic Questions
- Three fundamental questions determine how economies function:
- What goods/services should be produced?
- How should they be produced?
- Who consumes these goods/services?
Economic System
- Refers to the set of methods and principles utilized by a society for producing and distributing goods/services.
Factor Payments
- Income received by individuals supplying factors of production, which include land, labor, and capital.
Profit
- The profit is the difference between a business's total revenue and its expenses.
Traditional Economy
- An economic structure that relies on customs, habits, or rituals to address the basic economic questions, typically characterized by a lack of innovation.
Command Economy
- An economy where the government exerts control over production and distribution, emphasizing security and equity but lacking freedom and growth opportunities.
Market Economy
- A system where consumers and producers make decisions that drive the economy, allowing for greater freedom and flexibility.
Mixed Economy
- Combines elements of both market and command economies; the government provides some public goods while allowing consumer and producer choices in other areas.
Economic Social Goals
- Key objectives that guide economic systems include:
- Freedom
- Growth
- Efficiency
- Equity
- Security
- Stability
- Employment
- Environmental protection
Standard of Living
- A measure of prosperity that reflects the quality and quantity of goods and services available to individuals.
Innovation
- The process of creating and introducing new goods/services into the market, playing a crucial role in economic advancement.
Safety Net
- Programs designed to protect individuals during unfavorable economic conditions, providing support in times of need.
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Description
Test your knowledge of the three basic economic questions with these flashcards. Learn about the economic system and factor payments in the context of production and consumption. A great way to reinforce your understanding of fundamental economic concepts.
