1.2 The Nature And Purpose Of Economic Activity Flashcards
(30 cards)
Why are goods and services produced?
To satisfy peoples wants and needs
What is a need?
Something people must have and they cannot do without
E.g water and food
What is a want?
Something people would like to have but not essential to survive
(Not necessary for survival but nice to have)
E.g books
Can something be a want and a need?
Yes: food depending on the type of food
-protein and vitamins are needed
-chocolates are wants
Satisfying people’s needs and wants means improving……
Economics welfare
What is welfare
Essentially human happiness
What can improve economic welfare?
Anything that can make a person happier
What are the negatives of short term happiness
Can come at the expense of long term happiness
Economic welfare def?
The economic well-being of an individual, a group within society, or an economy
What is an economic system?
Set of institutions within a community that decides what , how and for whom to produce
How do you define or classify economic systems?
The mechanism(way) through which scarce resources reach the people who eventually consume them .
What are the two mechanisms?
-market mechanism
-command mechanism
What is a market economy?
Where goods are purchased through the price mechanism in a system of markets
What is a command economy?
Gov officials or planners allocate economic resources to firms and other productive enterprises
Most economies are what?
Mixed economies
What does a mixed economy contain?
-large market sector
-large non-market sector
In which the planning mechanism operates
In a pure market economy, what does the price mechanism do?
Allocating scarce resources among competing uses through the markets
What makes up the economy itself ?
The markets
What can cause markets to break up?
-transport costs and lack of info
How can a complete command economy actually exist?
Within a rigid controlled political framework because of the restrictions on individual decision making
How is the command economy similar to the market economy?
The price mechanism alone allocates resources
What is a price mechanism KEY DEF
The system where the forces of supply and demand determines the price of the commodities
When was the UK made into a mixed economy and how did this happen
Post WW2
-1944 Education act extended state provision or education
1948- national health service act did the same for healthcare
What did critics of the UK’s mixed economy argue in 1980?
-blamed it for UK’s deteriorating economic performance in comparison to competitors
-argued that public sector was wealth consuming and not wealth creating
