Economy Study Guide 2018

Foundations of Economy Capital - includes anything produced in an economy to create new products. tools and factories buildings would all be capital. The Economy of the United State is a market economy. This means that choices are largely based on producers and consumers. In a Command Economy economic choices are planed by a central planning counsel or government. A Traditional Economy economic decisions are made by a group such as a tribe. There is little friction among members because there is little competition. The three economic questions are what to produce? How to produce it? And who gets what is produced.

What are the basic wants (needs) of people food clothing and shelter. Financial capital is money and resources available for investing or spending on a product in hopes of regaining a profit. What determines the quantity of a good or service that is produced the amount of resources available such as land, labor and capital. The development of technology led to the least costly way of producing goods and services. A good is a product that you can obtain. (ie. Car, Groceries, clothing) A service is something that you can do for someone to make a profit. (ie tutoring, dog sitting) What are two other names for a Market Economy Capitalism and Free enterprise.

Vocabulary Words to Know Opportunity Cost – the highest valued benefit given up when a choice is made. Profit- the difference between the total cost of production and the revenues received from buyers. Capital- anything in an economy that is used to produce other goods and services. Factors of Production –resources people have to produce goods and services that satisfy their wants. Consumption - the act of buying or using goods and services. Mixed Economy- is a mixture of three basic systems.

Advantages and Disadvantages of Different Economy Traditional Economy – little friction among members because there is little or no competition. Changes are slow doesn’t allow for growth and development. Individual roles are clearly defined. System is generally well understood by participants. Command Economy – distributes wealth among all the society. Serves people collectively instead of individual focus on equality. Market Economy –little government intervention, adjust to change easily. Great variety of goods and services. Occasional market changes. Mixed Economy - government intervention can hinder the process. may not lead to optimal use of resources.