ANSWERING THE 3 ECONOMIC QUESTIONS BY: LISA ENNIS 8TH period

TERMS TO KNOW Economic system- the method used by a society to produce and distribute goods and services Factor payments- income people receive for supplying factors of production Safety net- government programs that protect people experiencing unfavorable economic conditions Standard of living- level of economic prosperity

TERMS TO KNOW Traditional economy- economic system that relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it. Ex: boys take occupations of their fathers Market economy- decisions are made by individuals and are based on exchange, or trade. Ex: free markets Centrally planned economy- the central government makes all the decisions on the production and consumption of goods and services Command economy- a central authority is in command of the economy; centrally planned economy Mixed economy- market based economic system with limited government involvement

The Key Economic Questions What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services?

What goods and services should be produced? Each society must decide what to produce in order to satisfy needs and wants The more you produce of some goods and services the less you can produce of other goods and services (tradeoffs and opportunity cost) Basic needs: food, shelter, clothing; wants: luxury items; services: education, health care, defense

How should these goods and services be produced? There are countless ways to create all of the things we want and need, which all require capital, land, and labor Ex: size and organizations of facilities, resources to use, time and effort communication

Who consumes these goods and services? Societies must decide how to distribute the available goods and services Ex: choices in products, value or price to products, access to services

Goals and values to answer questions Economic efficiency-make the most of resources Economic freedom- from government intervention from the production and distribution of goods and services Economic equity- fair distribution of wealth Economic growth and intervention- innovation leads to economic growth, and economic growth leads to a higher standard of living Other goals- societies pursue additional goals, such as environmental protection

Review! What are the 3 economic questions? The more you produce of some goods and services the less you can produce of other goods and services (tradeoffs and opportunity cost) is which of the 3 questions? Give an example of each question! ____ Factor Payments ____Safety Net income people receive for supplying factors of production government programs that protect people experiencing unfavorable economic conditions

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