Individuals, business, and government
the three economic actors to make choices.
scarcity
___ forces you to make choices among ways to spend you money and time // results from the combination of limited resources and unlimited wants.
choices
nations must also make ___ in order to use their natural, human, capital, and entrepreneurial resources efficiently.
what to produce, how to produce, and for whom to produce
three economic questions our nations' leaders' must face.
economic system
reflects the process a nation follows to produce goods and services.
traditional, command, market, and mixed
four types of economic systems.
mixed
all economics are ___, pure traditional, pure command, and pure market economies do not exist in the world today.
traditional economies
a few mixed economics that are closest to the pure traditional model are classified as...
command economies
mixed economics that are closest to the pure command model are known as....
market economies
mixed economies that are closest tot he pure market system are classified as...___
traditional economy
based on a society's values - its customs and traditions.
past
the answers to the three basic economic questions of a traditional economy are found in the ____
rituals, habits, laws, and religious beliefs
contemporary economic activities of the traditional economy are based on ____, ____, ____, and ____ ____, based on the groups' ancestors.
parents
in a traditional economy, children often carry the economic roles played by their ____.
produced
in a traditional economy, tradition determines in large part what is ___.
men and women
in a traditional economy ___ and ____ perform distinct tasks.
custom
___ determines how items will be produced in a traditional economy.
everyone
For whom are goods produced in a traditional economy?
themselves
by sharing products, members of a traditional economy work to maintain the entire group rather then just ___
north america, latin america, asia, and afria
traditional economic systems still exist in parts of ____ ____, ___ ____, ____, and _____
command economy
relies on government officials to answer the three basic economic questions.
central planners
have the power to decide what products will be made and how these products will be produced in a command economy.
little or no say
because central planners make decision about what, how and for whom to produce, individuals have ___ or ___ ___ in economic choices
common
pure command economies were ___ in the past.
market economy
individuals answer the three basic questions in this economy
government
in a market economy the _____ has no say in what, how and for whom goods are produced, and the factors of production are owned by individuals.
buy, sell, and produce
people can ___, ____, and ____ anything they want in a market economy.
market
the free exchange of goods and services,and provides the only form of control over what goods and services are bought and sold.
Adam Smith
a scottish economist and philosopher who explained the process of market regulation.
adam smith
contended that when the government is not involved in the economy, the market is driven purely by self-interest
self-interest
the impulse that encourages people to fulfill their needs and wants
grow
Smith argued that self-interest benefits all of society by helping the economy ____
market exchange
according to smith, in a ____ ____, each person attempts to gain the greatest possible advantage from the transaction.
invisible hand
self-interest acts as an ___ ___ that also leads them to do what is best for society, even if they are unaware of how their actions may benefit others.
government involvement
smith believed that ____ ___ in the economy conflicts with self-interest and limits the ability of the "invisible hand" to regulate the market.
incentive
something that encourages you to behave in a particular way.
penalties
incentives can also take the form of ____, such as money being deducted from paychecks.
mixed economy
combines elements of traditional, market, and command economic models to answer the three basic economic questions - economists classify economies on the degree of government control.
authoritarian socialism, capitalism, democratic socialism
the three main categories of mixed economies.
communism
mixed economies that are closest to the pure command model (government owns or controls nearly all the factors of production)
long term plans
Commuist countries have ___ ____ ____ to help answer the questions of production.
capitalism
the closest to the market model. - individuals own the factors of production and answer the basic economic questions.
individuals
____ decide what to produce, what occupation they have.
governement
____ may enact some regulations, its involvement in the economy is relatively limited. - taxation and spending policies enable government to provide services such as education, welfare, and national defense.
democratic socialism
mixed economy that falls between communism and capitalism - the government owns some factors of production. Government ownership is limited to key industries such as electrical untilities and telephone networks which are national concern.
democratic socialism
individuals are able to influence economic planning through the election of government officials
needs
a nation will develop a particular economic system that it believes is most likely to meet the ____ of its citizens
free enterprise
a system under which business can be conducted freely with little government intervention.
private property and contracts, choices, competition, decisions based on self-interest, limited government
five main features that the free-enterprise system is based on.
private property
goods that are owned by individuals and by business rather than by government. (this includes personal itms such as CDs)
contracts
agreements with others to buy and sell goods and services
oral or written
a contract can either be ____ or ____, regardless of the term, it is legally binding.
compeition
the economic rivalry that exists among businesses selling the same or similar prodcuts. - this encourages producers to improve existing products and develop new ones in order to attract customers.
voluntary exchange
when producers and consumers unconditionally purchase and sell products, and they believe that the opportunity costs of such a trade are acceptable to both parties.
benefit
in a free enterprise system, a successful producer can ____ other economic actors. - if a company is successful, then it can be expanded and hire more workers. - creates more jobs in the workplace. - and spend money on product development which will provi
consumers
___ influence production by buying goods and services.They communicate with producers by making decisions on what to buy. the level of product sales tells a producer if his company has accurately answered the basic economic questions.
government
____ regulates and oversees the effects of the decisions the producers and consumers make on the economy as a whole.
circular flow model
where exchange of goods and services can be traced.
product market
represented by green arrows and represents all of the exchanges of goods and services in the economy.
resources market
represents the exchange of resources between households and business firms and the government
income
the money paid to households by business firms and the government in exchange for the households' resources.
actors
the economic ____ together determine the general objectives of their economic system
freedom, efficiency, equity, stability, growth, security
the US has six major goals many of which are held by other nations around the world
economic freedom
consumers are free to decide how to spend their incomes on goods and services. Workers are free to choose an occupation, change jobs etc.
economic efficiency
efforts to make the best use of scarce resources. can be measured by how many goods and services a nation's workers produce. The more products each worker produces, the more efficient the economy will be.
economic equity
aka economic justice - deals with questions of fairness and of right and wrong.
economic security
a nation's efforts to protect its members from poverty, business and bank failures, medical emergencies etcs. Can result from individual and government actions.
economic stability
achieving full employment and achieving stable prices.
full employment
the lowest possible level of unemployment the economy
price stability
achieved when the overall price level of the goods and services available in the economy is relatively constant.
economic growth
efforts to increase the amount of goods and services produced by each worker in the economy.
standard of living
refers to people's economic well-being. Economists measure this by how much the average person in that country is able to consume in a given period of time. - improves when production from each worker increases faster than the total population.