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Go #14 basics of economics completed 2011 2012


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Go #14 basics of economics completed 2011 2012

  1. 1. GO # 14 Economic Concepts  Scarcity:  is  the  inability  to  satisfy     Resources:  are  the  factors  of  all  wants  at  the  same  time.  All   production  that  are  used  in  the  resources  and  goods  are  limited.       production  of  goods  and  services.    This  requires  that  choices  be   Types  of  resources  are  natural,    made.   human,  capital,  and  entrepreneurship    Choice:  is  a  selection  of  an  item  or  action   Opportunity  Cost:  is  what  is  given  up  from  a  set  of  possible  alternatives.     when  a  choice  is  made  –i.e.  the  highest    Individuals  must  choose  or  make   valued  alternative  forgone.    decisions  about  desired  goods  and     Individuals  must  consider  the  value  of  services  because  these  goods  and  services   what  is  given  up  when  making  a  are  limited.     choice.       Incentives:  are  things  that  incite   Price:  is  the  amount  of  money   or  motivate.    Incentives  are  used     exchanged  for  a  good  or  service.   to  changed  economic  behavior   Interaction  of  supply  and  demand     determines  price.    Price  determines     who  acquires  goods  and  services.  Production:  is  the  combining  of  human,     Consumption:  is  the  using  of  natural,  capital,  and  entrepreneurship   goods  and  services.    Consumer    resources  to  make  goods  or  provide   preferences  and  price  determine  services.    Resources  available  and     what  is  purchased  and  consumed.  consumer  preferences  determine  what  is  produced.      Supply:  is  the  amount  of  a  good  or   Demand:  is  the  amount  of  a  good    service  that  producers  are  willing   or  service  that  consumers  are  and  able  to  sell  at  a  certain     willing  and  able  to  buy  at  a  certain  price(Interaction  of  supply  and   price.  (Interaction  of  supply  and  demand  determines  price)   demand  determines  price)  
  2. 2. Types of EconomiesEvery country m ust develop an economic system to determine how to use its limited productiveresources. The key factor in detemrine the type of economy is the extent of __governmentinvolvement_. The type of economy a country has answer three basic questions. • What will be produced? • Who will produce it? • For whom will it be produced? Tradiditonal Economy Free Market Economy • Economic decisions are based on • Private ownership of custom and historical precedent property/resources • Profit motive • People often perfomr the same type of • Competition workas their parents and grandparents, regardless of ability or • Consumer sovereignty potential • Individual choice • Minimal government involvment in the economy Command Economy Mixed Economy • Central ownership (usually by • Individuals and businesses as owners government) of property/resources and decision makers for the private sector • Government as owner and decision • Centrally-planned economy maker for the public sector • Government role is greater thanin a free market economy and less than in a command economy • Lack of consumer choice • Most economies today (including the United States) are mixedd economiesNo country relies exclusively on markets to deal with the economic problem of scarcity.