Chapter 2 Reading Flashcards
Wha are the three basic economic questions that every society must answer
1) What goods and services will be produced?
2) How will these goods and services be produced?
3) Who will receive the goods and services being produced
What is then answer to the question: What goods and services should the economy produce?
it depends on the goods and serviced that society wants
What does the word “distribution” refer to in economics
Distribution refers to the way an economy distributes goods and services it produces. (depends on how the economy is organized)
What are Capitalist/Market economy’s?
private individuals and firms own most of the resources. Decisions are determines by individual desires for products and profit-making decisions by firms (governments dont make these decisions)
In a Capitalist/Market economy, what are the governments primary roles?
protecting property rights, enforcing contracts between private parties, providing n national defence, etc
What are Planned/Command economies?
productive resources are owned by the government, they make the most economic decisions. (Only north Korea and Cuba are planned economies)
in economics, what is “production”
Production involves turning resources into products that people are willing to buy
What are the four main categories of resources used to produce goods and services.
Land (rent)
Labour (wages)
Capital (interest)
Entrepreneurial ability (profit)
Improvement to labor capabilities from training, education, and apprenticeship programs– typically called ______ ________– add to labor productivity
Human Capital
What is “Capital”
Capital includes all manufactured products that are used to produce other goods and services
What is “Production Efficiency”?
production efficiency occurs when goods are produced at the lowest possible cost
What is “allocative efficiency?”
when the goods and services produced in the economy is exactly what society desires (we dont produce things that wont be bought bc that would be a waste)
In a __________ __________, the marginal cost of the last unit produced equals the marginal benefit
Market Equilibrium
