Markets

Question 1

Law of scarcity

Answer 1

Goods are scarce because there aren’t enough resources to produce all the goods that people want to consume.

Question 2

Factors of production

Answer 2

1) Land
2) Labour
3) Capital
4) Entrepreneurship

Question 3

Scarcity

Answer 3

Difference between wants and needs and available resources

Question 4

Types of economic systems

Answer 4

• Pure Market
• Pure Command
• Traditional
• Mixed

Question 5

Pure Market

Answer 5

No government involvement
Private firms account for all production.
Consumers decide what should be produced, businesses determine how they are produced, and the people with the most money buy more goods and services.

Cons - Difficulty enforcing property laws, no minimum income (not everyone has something to sell), some firms monopolize

Question 6

Pure Command

Answer 6

All resources are government owned
One person or a group of officials decide what will be produced, the government runs all business and decides how goods are produced, government decides who receives goods

Cons - Low priority to consumers, little freedom of choice, resources owned by state are often useless-individuals don’t care if they own it or not

Question 7

Traditional

Answer 7

Economy is shaped by custom or religion.
Customs and religion decide who, what, why, and how.

Question 8

Mixed

Answer 8

Most economies today are mixed.
Classification depends on extent of government intervention.
In the US, government accounts for 1/3 of all economic activity.

Question 9

Political philosophies

Answer 9

1) Capitalism - private ownership of businesses, competition in the marketplace, democracy is usually associated with this
2) Socialism - To keep prices low for everyone, government runs key industries, have more social services
3) Communism - Totalitarian, government runs everything, theoretically there is no unemployment in communist countries, government decides school, where they will live.

Question 10

Privatisation

Answer 10

State-owned companies are sold to private individuals and companies. (usually happens when an economy is in transition from command to free enterprise system)

Question 11

Need for markets

Answer 11

• exchange of goods and services
• improvement of quality of life of society
• higher production

Question 12

Monopoly

Answer 12

When a single seller or producer assumes a dominant position in the industry or a sector.

Question 13

Oligopoly

Answer 13

A market in which the industry is dominated by a few companies that are influential participants in the market.