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| study of how individuals & nations use scarce resources to satisfy their wants & needs |
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| what is the key to economics? |
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| the hope for a reward/fear of a punishment |
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| resources are limited, human desires are unlimited |
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| concept of "free" in politics |
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| scarce resources are required to produce them |
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| sacrifice one thing in order to have another |
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| country that decides to produce more military goods has fewer resources to devote to public |
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| factors of production (definition) |
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| resources used to make all goods & services |
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| the 4 factors of production |
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| land, labor, capital, entrepreneur |
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| any human made resource used to produce other goods/services |
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| physical capital, human capital |
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| human-made objects that are used to create other goods/services (ex tools & factories) |
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| the knowledge & skills a worker gains through education & experience |
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| which types of capital must economy have to grow? |
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| leaders who combine land, labor & capital to create & market new goods/services |
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| a medium of exchange, unit of account, store of value |
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goods4goods
INEFFICIENT - thats why we use money today |
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| method used by a society to produce & distribute goods/services |
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| what causes economic systems to differ |
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| how they respond to scarcity |
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| 1. what G/S shoud be produced 2. how should these G/S be produced 3. who consumes these G/S |
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| economic goals (6) == EEEGOS |
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| 1. efficiency 2. economic freedom 3. open opportunity 4. security 5. equity 6. growth |
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| economic goal - efficiency |
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| must make best possible use of its resources ->> specialization |
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| economic goal - economic freedom |
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| economic goal - open opportunity |
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| everyone can compete in the marketplace >> economic mobility |
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| successful systems reassure that G/S will be available when needed, most societies try to provide a "safety net", gov assistance to poor/elderly/jobless |
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| must decide how to share wealth |
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| must grow; which comes from innovation [changes in techn & methods of production] |
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| allows buyers/sellers to exchange things based on voluntary exchange of G/S |
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| voluntary exchange is beneficial bc _________ |
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| what is being created w/ voluntary exchange? |
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| ex of middleman in free market |
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| what do middlemen promote |
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| what leads to the most efficient use of time&money |
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| what does an individual want in free market |
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| intends only his own gain |
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| what happens if sellers do not provide quality, low cost products |
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Definition
| we go to their competitor & they go out of biz |
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| competition _______s inefficient producers |
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| must have ____ & ____ to be in competition |
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| history of 2 biggest retailers & biggest auto manufacturers |
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| then - sears & general motors. now - walmart & toyota |
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| who benefits from competition |
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| when consumers buy, they signal ________ |
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| to producers how much to make |
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| published book (name, author, year) |
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| the wealth of nations by adam smith in 1776 |
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| what did the wealth of nations establish |
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| the theoretical bawsis of the free market economy |
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| what did adam smith observe |
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| self interest & competition work together to regulate marketplace |
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| what does self interest cause |
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| consumers to seek high quality, low priced G/S |
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| what does competition force |
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| producers to provide high Q, low P |
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| what is the invisible hand |
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| adam's smith phenomenom that self interest and competition occur w/o any outside direction |
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| gov should not interfere w/ market |
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| advantages of free market (4) |
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| efficiency, freedom, growth, consumer control |
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| idea in free market that consumers decid what gets produced |
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| the 2 things free market economy is powered by |
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| person/group liviing in same residence >> consumers |
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| organization using resources to produce a prodeuct which it sells >> producers |
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| place where firms purchase factors of production from households |
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| how do households purchase G/S from product market |
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| w/ money they received from firms in factor market |
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| how does command economy operate compared to free market |
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| command economy opposes (4) |
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Definition
1. private property
2. free market privacy
3. competition
4. consumer choice |
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| socialism is the belief that |
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| all wealth should be distributed evently throughout society |
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| how do they believe equality is possible in socialism |
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| if the centers of economic power are owned by the public |
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| what did marx believe would happen after 5/6 gen? |
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| people will become accustomed to sharing & gov will no longer be necessary |
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| karl marx/communism quote |
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| "to each according to his needs; from each acording to his abilities" |
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| socialism - central gov controls economy. communism - no gov; collective ownership |
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| union of soviet socialist republics |
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| who overthrew russian tsar in 1917 |
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| commuinists led by vlamdir lenin |
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| how long did ussr survive |
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| what happened to farms in soviet union |
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| gov consolidated them into enormous state-run farms |
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| large farms leased to groups of peasant farmers |
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| incentives/income in ussr? |
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| NO incentives, GUARANTEED income |
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| problems in soviet agriculture |
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| constant problems in providing their people with food |
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| quote for soviet industry |
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Definition
| we prtend to work and they pretend to pay us |
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| quanitity or quality in soviet? |
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| american free enterprise, "the land of _____" |
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| how many small biz in america |
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| how are most small biz started |
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| social/political commitment to giving people the freedom to compete in the marketplace |
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| constitutional protections that allow biz activities |
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| RIGHT TO PROPERTY, 5th amendment (eminent domain) |
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| rights of private ownership (3) |
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1. right to exclusive use
2. legal protection against invasion
3. right to sell property to another |
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| without _______, free enterprise CANNNOT exist |
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Definition
| rights of private ownership |
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| sales/direct tax must be ____ for everybody |
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Definition
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| amendment of right to tax incomes progressively |
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| relation b/w producers & consumers & gov & info |
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| gov make sure producers provide consumers w/ info |
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| allows people to decide which agreements to enter |
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| allows people to decide when/what they want to buy/sell |
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| % n korea controls & china controls |
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| who owned hong kong & what kind of economy system |
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| "regulate" vs "deregulate" |
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| gov gets involved, gov pulls back |
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| what kind of public goods must gov provide |
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| those that are impossible to exclude nonpayers (ex sidewalk, police protection) |
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| public sector vs private sector |
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public: part of economy that provides & maintains public goods
private: involves transactions of prviate biz & indv |
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| free rider problem animal example |
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| why are public goods usually impossible for a private biz to establish |
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| bc a 1-1 link b/w payment and receipt is hard to establish |
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| public goods are necessary due to ______ |
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| when a free market does NOT provide a G/S efficiently |
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| economic side effect of a G/S that generates benefits/costs to someone other than the person who decides how much to produce/consume |
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| benefit everybody, not just those who have paid |
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| cause part of the cost of production to be paid for by someone other than the producer |
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| how does gov encourage positive externality |
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Definition
| by providing public education so we can have a well educated workforce |
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| income level below that which is needed to suport family/household |
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| poverty line in 2010 for single praent w/ one child vs family of 4 |
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Definition
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| poverty line adjusts to _______ |
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| what is poverty the result of |
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| unequal distribution of wealth |
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| under franklin roosevelt during great depression |
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| lyndon johnson in 1960s war on poverty |
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| cash transfers: direct or indirect? |
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| direct transfer to the poor done by state/fed gov |
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1. temp assistance for needy family
2. social security
3. unemploymet insurance
4. workers compensation |
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| in-kind benefits: direct or indirect? |
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| goods/services produced at free/reduced prices |
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