Economics Systems Overview
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Questions and Answers

What is a primary feature of a free market economy?

  • Equal distribution of resources
  • Government controls all production
  • Minimal government interference (correct)
  • Prices are fixed by the government

A command economy promotes competition among businesses to foster innovation.

False (B)

List one pro and one con of the free market system.

Pro: Efficient allocation of resources; Con: Inequality.

In a command economy, the government has control over _____ aspects of economic activity.

<p>most</p> Signup and view all the answers

Which of the following is a disadvantage of a free market economy?

<p>Inequality in wealth distribution (D)</p> Signup and view all the answers

Match the economic systems with their advantages:

<p>Free Market = Consumer choice and innovation Command Economy = Promotes equality and stability</p> Signup and view all the answers

A command economy can result in more job security compared to a free market economy.

<p>True (A)</p> Signup and view all the answers

What can happen if a free market does not balance correctly?

<p>Resource wastage, such as overproduction or underproduction.</p> Signup and view all the answers

What is a potential negative outcome of a lack of competition in an economy?

<p>Stagnation of innovation (D)</p> Signup and view all the answers

A mixed economy allows for complete government control over production and distribution.

<p>False (B)</p> Signup and view all the answers

Name one advantage of a traditional economy.

<p>Stability</p> Signup and view all the answers

In a mixed economy, the government can provide essential services like _______ to ensure social welfare.

<p>healthcare</p> Signup and view all the answers

Match the following economic systems with their characteristics:

<p>Command Economy = Limited consumer choice and poor resource allocation Mixed Economy = Balance between freedom and control Traditional Economy = Guided by customs and community-based decisions Free-market Economy = Dominated by private sector decisions</p> Signup and view all the answers

Which of the following is considered a disadvantage of a mixed economy?

<p>Government inefficiency (B)</p> Signup and view all the answers

A traditional economy encourages rapid technological advancement.

<p>False (B)</p> Signup and view all the answers

What effect can a government have in a mixed economy regarding wealth?

<p>Redistribute wealth</p> Signup and view all the answers

What is microeconomics primarily concerned with?

<p>Individual choices of people and businesses (A)</p> Signup and view all the answers

Macroeconomics studies the behavior of individual consumers and businesses.

<p>False (B)</p> Signup and view all the answers

What is opportunity cost?

<p>The value of what you give up when you choose one option over another.</p> Signup and view all the answers

The _____ of a product is determined by how much consumers want to buy at different prices.

<p>demand</p> Signup and view all the answers

Match the following economic terms with their definitions:

<p>Supply = The amount of a product that producers are willing to sell at different prices Elasticity = A measure of how much quantity demanded changes with price changes Inflation = The rate at which prices for goods and services increase GDP = The total value of all goods and services produced in a country</p> Signup and view all the answers

Which of the following best describes market equilibrium?

<p>A situation where quantity demanded equals quantity supplied (D)</p> Signup and view all the answers

Consumer choice refers to the decisions made by businesses regarding their products.

<p>False (B)</p> Signup and view all the answers

What is the unemployment rate?

<p>The percentage of people in the workforce who are looking for jobs but cannot find one.</p> Signup and view all the answers

Which of the following statements about income distribution is true?

<p>Equitable income distribution tends to strengthen consumer spending. (D)</p> Signup and view all the answers

The Law of Demand states that as prices increase, quantity demanded increases.

<p>False (B)</p> Signup and view all the answers

What does the equilibrium price represent in a market?

<p>The price at which the quantity demanded equals the quantity supplied.</p> Signup and view all the answers

The ___ curve slopes upward, indicating that as the price of a good increases, the quantity supplied increases.

<p>Supply</p> Signup and view all the answers

Which of the following best describes the relationship between supply and demand?

<p>Prices are determined by the interplay of supply and demand. (C)</p> Signup and view all the answers

Match the economic concepts to their definitions:

<p>Supply = Amount of a good that producers are willing to sell at different prices Demand = Amount of a good that consumers are willing to buy at different prices Equilibrium Price = Price where quantity demanded equals quantity supplied Law of Supply = As price increases, quantity supplied increases</p> Signup and view all the answers

Tracking income distribution can help identify potential ___ and emphasize the need for inclusive economic policies.

<p>social tensions</p> Signup and view all the answers

The Demand Curve slopes upward from left to right.

<p>False (B)</p> Signup and view all the answers

What is one consequence of a non-progressive tax system?

<p>Wealthier individuals pay less tax compared to lower-income earners (D)</p> Signup and view all the answers

Discrimination based on race, gender, or ethnicity can enhance economic opportunities for certain groups.

<p>False (B)</p> Signup and view all the answers

What is one suggested solution for reducing economic inequality through education?

<p>Increasing funding for underfunded schools.</p> Signup and view all the answers

A higher ______ helps reduce economic inequality by providing low-income workers with a livable income.

<p>minimum wage</p> Signup and view all the answers

Match the following concepts with their descriptions:

<p>Progressive Tax System = Higher tax rates for wealthier individuals Redlining = Restricting access to loans based on race Minimum Wage = Legal minimum amount that workers can be paid Workers' Rights = Ensuring fair treatment and compensation for employees</p> Signup and view all the answers

Which of the following measures does NOT directly contribute to reducing economic inequality?

<p>Increasing tax loopholes for wealthy individuals (B)</p> Signup and view all the answers

Strengthening workers' rights includes supporting the right to unionize.

<p>True (A)</p> Signup and view all the answers

Name one effect of economic inequality on public services.

<p>Less funding for education and healthcare.</p> Signup and view all the answers

What is the primary purpose of fiscal policy?

<p>To influence the economy through spending and taxes (B)</p> Signup and view all the answers

A surplus occurs when the demand for a good or service exceeds its supply.

<p>False (B)</p> Signup and view all the answers

Define scarcity in economic terms.

<p>Scarcity refers to the condition where limited resources are insufficient to meet human wants and needs.</p> Signup and view all the answers

GDP/capita is calculated by dividing the total economic output of a country by its ______.

<p>population</p> Signup and view all the answers

Match the economic industries with their descriptions:

<p>Primary Industry = Extraction of natural resources Secondary Industry = Manufacturing and construction Tertiary Industry = Service provision Quaternary Industry = Knowledge-based activities</p> Signup and view all the answers

Which of the following best describes monetary policy?

<p>Controlling the money supply and interest rates (A)</p> Signup and view all the answers

What does GDP signify in an economy?

<p>GDP signifies the total value of goods and services produced within a country during a given period.</p> Signup and view all the answers

The tertiary industry is focused on the extraction and harvesting of resources.

<p>False (B)</p> Signup and view all the answers

Flashcards

Free Market

A system where individuals and businesses make decisions with minimal government interference, guided by supply and demand.

Efficient Allocation of Resources

In a free market, the market determines how goods and services are distributed. This often leads to efficient use of resources.

Encourages Innovation

Competition in a free market encourages innovation and new ideas, leading to advancements in products, services, and technology.

Consumer Choice

A free market offers a variety of goods and services to meet different tastes and preferences.

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Command Economy

In a command economy, the government makes most economic decisions, controlling production, pricing, and distribution.

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Promotes Equality

A command economy can help distribute wealth and resources more evenly, potentially reducing income inequality.

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Stability in Command Economies

Centralized government control can help stabilize the economy, potentially leading to more stable employment.

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Efficient use of resources in command economies

Centralized control allows the government to direct resources towards specific sectors, like defense or infrastructure, as they see fit.

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Lack of Innovation in a Command Economy

A lack of competition and profit incentives can lead to a stagnant economy, as companies have no need to innovate or improve.

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Limited Consumer Choice in a Command Economy

Governments control what is produced, leaving little room for individual preferences or diversity in goods and services.

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Inefficient Resource Allocation in a Command Economy

Government decisions may not reflect the true needs of consumers or local conditions, leading to inefficient resource allocation.

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Potential for Authoritarianism in a Command Economy

The concentration of power in the government can lead to corruption and abuse of power.

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What is a Mixed Economy?

A mixed economy combines elements of both free-market and command economies.

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Balance between Freedom and Control in a Mixed Economy

Private businesses operate freely in many sectors, while the government ensures social welfare and regulation.

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Public Services in a Mixed Economy

Governments can provide essential services like healthcare, education and infrastructure, while still encouraging private enterprise.

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Reducing Inequality in a Mixed Economy

Governments can redistribute wealth through social programs or taxes to reduce inequality.

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Income Gap

The difference in income between skilled and unskilled workers keeps growing, leading to a wider gap in wealth and economic opportunities.

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Unprogressive Taxes

Countries with tax systems that don't favor higher earners contribute less to public services, which are essential for everyone's well-being.

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Discrimination and Economic Inequality

Discrimination based on race, gender, or ethnicity limits opportunities for certain groups, hindering economic progress.

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Equal Access to Education

Investing in quality education for all can bridge the economic gap by ensuring everyone has a chance to succeed, regardless of their background.

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Progressive Taxation

Making wealthier taxpayers contribute a larger share helps fund essential public services that benefit everyone, reducing inequality.

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Minimum Wage and Inequality

A higher minimum wage provides a livable income for low-income workers, boosting their spending power and stimulating economic growth.

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Worker Rights and Inequality

Protecting worker rights ensures fair treatment, safe work environments, and secure employment, contributing to economic stability and reducing inequality.

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What is Microeconomics?

The part of economics that focuses on how individuals and businesses make decisions about buying and selling goods and services.

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What is Macroeconomics?

The part of economics that studies the overall economy, including factors like national income, unemployment, and inflation.

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What is Supply?

The amount of a product or service that producers are willing to offer for sale at different prices.

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What is Demand?

The amount of a product or service that consumers want to buy at different prices.

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What is Opportunity Cost?

The value of what you give up when making a choice. For example, choosing a toy over saving for a game means the game is the opportunity cost.

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What is Market Equilibrium?

The point where supply and demand meet, meaning the amount producers want to sell matches the amount consumers want to buy. It's where there's no surplus or shortage.

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What is Consumer Choice?

Decisions made by individuals about what to buy based on their preferences and available money.

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What is Gross Domestic Product (GDP)?

The total value of all final goods and services produced in a country during a specific time period. It measures how well the economy is performing.

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Income Distribution

The distribution of wealth and income across a population.

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Demand

The amount of a good or service consumers are willing and able to buy at different prices.

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Supply

The amount of a good or service producers are willing and able to sell at different prices.

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Equilibrium Price

The point where the quantity demanded by consumers equals the quantity supplied by producers.

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Demand Curve

A downward sloping curve representing the relationship between price and quantity demanded. As prices decrease, quantity demanded increases.

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Supply Curve

An upward sloping curve representing the relationship between price and quantity supplied. As prices increase, quantity supplied increases.

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Shortage

When the quantity demanded exceeds the quantity supplied.

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Surplus

When the quantity supplied exceeds the quantity demanded.

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What is fiscal policy?

Government actions to influence the economy using spending and taxes, like increasing spending during a recession to boost growth.

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What is monetary policy?

Actions taken by a central bank to control money supply and interest rates to manage inflation and stabilize the economy.

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What is scarcity?

The situation where limited resources can't meet everyone's wants and needs, forcing choices about how to use them.

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What's a surplus?

When the supply of something is greater than the demand, leading to excess and potentially lower prices.

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What is GDP per capita?

A country's total economic output divided by its population, showing average economic well-being.

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What are goods?

Physical items produced, bought, and sold to satisfy needs and wants like food, clothing, and cars.

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What are services?

Intangible activities performed to satisfy needs or wants, like healthcare, education, and entertainment.

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Study Notes

Systems

  • Systems are structures for managing resources, production, and distribution
  • Free Market: Individuals and businesses make decisions with minimal government interference, driven by supply and demand
    • Pros: Efficient resource allocation, encourages innovation, consumer choice, and flexibility
    • Cons: Inequality, resource wastage, exploitation of workers, and lack of public goods
  • Command Economy: Government controls most economic aspects, including production, pricing, and distribution
    • Pros: Promotes equality, stability, and efficient resource use for national goals
    • Cons: Inefficiency, lack of innovation, limited consumer choice, poor resource allocation, and potential authoritarianism

Mixed Economy

  • Combines elements of both free-market and command economies
    • Pros: Balance between freedom and control, flexibility, public services and welfare, reduced inequality
    • Cons: Government inefficiency and potential slow economic progress in heavily regulated industries

Traditional Economy

  • Production and distribution are guided by customs, traditions, and community-based decisions
    • Pros: Stability, sustainability, strong community bonds, and low environmental impact
    • Cons: Inequality, limited economic growth, inefficient resource use, resistance to change, lack of access to modern resources and healthcare facilities

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Description

Explore the fundamental concepts of economic systems, including free market, command economy, and mixed economy. Understand the pros and cons of each system as well as their impact on resource management and distribution in society.

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