Questions and Answers
What is the fundamental problem in economics?
Scarcity
Example of a capital good:
Machinery
What are the 4 factors of production?
Land, labor, capital, entrepreneur
What is an example of a need and a want?
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Example of a consumer good:
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Example of a service?
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Example of a good?
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What does underutilization mean?
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In a ____________ economic system, investments are determined by private decisions rather than state control.
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Everyone knows their role. Easy to make decisions. Life is generally stable and predictable; these are all strengths of a _____________ economy.
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Low standard of living, discourages new ideas, difficult to adjust in a disaster; these are weaknesses in a ___________ economy.
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What are the 3 basic economic questions?
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Quick to adjust to change, can provide more equal incomes; these are all strengths of a _____________ economy.
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Often fails to meet the needs or wants of the people, lacks incentive to work; these are all weaknesses of a _____________ economy.
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Market may fail, doesn't provide a safety net for those who cannot work; these are all weaknesses of a _____________ economy.
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High degree of customer satisfaction, economy can change direction over time, high degree of freedom for buyers and sellers; these are all strengths of a _____________ economy.
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What is the force that encourages people and organizations to improve their material being?
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What does open opportunity mean?
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What is specialization?
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An example of a non-durable good is?
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How do consumers exercise their power or vote in a market economy?
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Unlimited liability, limited access to funding, limited life; these are disadvantages of a ______________.
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Easy to start, shared decision making, larger pool of capital; these are advantages of a ______________.
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Unlimited liability, potential for conflict, limited life; these are disadvantages of a ______________.
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Difficult and expensive to start, double the taxes, potential loss of control by founders, more legal requirements/restrictions; these are disadvantages of a ______________.
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Limited liability for owners, easy to sell, easy to attract capital, long life; these are advantages of a ______________.
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Easy to start, few regulations, owner keeps profits, easy to sell, owner in complete control; these are advantages of a ______________.
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An example of a durable good is?
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What is the role of the consumer as ruler of the free market?
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What is a general rise in prices over time?
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What is the most common type of economy?
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What is a factor market?
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Study Notes
Fundamental Concepts in Economics
- Scarcity is the fundamental problem in economics, driving the need for efficient resource allocation.
Factors of Production
- Four key factors: land, labor, capital, entrepreneur.
Goods and Services
- Capital goods are items like machinery used for production.
- Consumer goods, such as clothing, fulfill direct consumer needs.
- Services are provided to consumers, exemplified by restaurants.
Needs and Wants
- Needs are essentials for survival (e.g., water, food), while wants are non-essential desires (e.g., luxury items like a big screen TV).
Economic Systems
- Free enterprise (market) economies rely on private investment and decisions rather than state control.
- Traditional economies are characterized by established roles, stable decision-making, but hindered by low living standards and resistance to change.
- Command economies can swiftly adjust but often fail to meet consumer needs and lack incentives.
- Market economies foster high customer satisfaction and freedom but can lead to market failures and safety net deficiencies.
Economic Questions and Decision Making
- The three fundamental economic questions are what to produce, how to produce it, and for whom to produce it.
Market Dynamics
- Profit motive encourages enhancement of material wealth.
- Open opportunity allows everyone to compete in the marketplace.
- Specialization enables individuals to master specific tasks or skills.
Consumer Power
- Consumers exert influence in a market economy primarily through their purchasing choices.
Business Structures
- Sole proprietorships: pros include ease of setup, complete control, but face unlimited liability and limited funding.
- Partnerships: advantages like shared decision-making exist alongside unlimited liability and potential conflicts.
- Corporations: offer limited liability and longer life but face complexities in startup and regulations.
Good Types
- Non-durable goods are items like gas that are consumed quickly.
- Durable goods include long-lasting items, such as a washer and dryer.
Economic Indicators
- Inflation refers to the general rise in prices over time.
- Mixed economies combine elements of market and command systems and are the most common type.
Market Mechanism
- In factor markets, firms acquire factors of production from households, driving the economy's functionality.
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Description
Explore the essential concepts of economics with these flashcards. Learn about scarcity, factors of production, and the distinction between needs and wants. Perfect for students seeking to grasp basic economic principles.
