Economic Systems

·      How people produce goods/services; how they distribute them among themselves; and how they use them; Examples—Market (free enterprise/capitalism)/mixed/command/traditional

Market Economy (free enterprise/capitalism) 

Consumers or citizens can choose their jobs and buy any type of goods and services.

Mixed Economy

Some businesses are owned by the government and others are owned by private citizens

Command Economy

The government owns the country’s resources and businesses.  The government decides what goods should be produced;  people’s choices of jobs, goods, and services are limited.

Traditional Economy

People use the same work methods and tools that were used a tong time ago; They do not produce enough goods to have a surplus to sell so they can not earn extra money to buy better equipment.  This makes certain that the working method will never change.

Economic Institutions

Households and families

Wise Consumers

·      Analyze advertisements to determine value, consider priorities and budget.

Barter

A money-less exchange of goods or services

Money

·      Any object or material serving as a medium of exchange and a measure of value

Borrow

To receive which the intention of returning the same or an equivalent

Credit

·      A debt system enabling people to get goods/services before fully paying for them.

Scarcity

A limited supply of a good or service; usually high prices

Interdependence

Where people, businesses, and countries rely on others to survive

Profit

·      Money made after the bills are paid; 

Sale Revenue – bills = profit

Invest

·      Commit money in order to gain a financial return

Productivity

·      The amount of goods or services that can be made in a certain amount of time; increased with new technology, specialization, and new knowledge.

Specialization

·      when one person does a specific job in a business.

Competition

Where more than one person or businesses make a good or service.

Supply

Amount of goods/services business makes for a certain price.    

Demand

·      Amount of goods or services consumers want to buy at a certain price

Market

·      Where goods and services are traded.

Market Clearing Price

·      The prices of goods and services are where supply meets demand.

Production Equation

Land (natural resources) + Labor (work done by people) + Capital (machines/tools) = goods/services

Good

·      Object bought that you take with you.

Service

·      Something paid for that other people do for you.

Consumer

A person who uses up any good or service from a producer.

Producer

·      Maker of a good or service.

Gross National Product (GNP)

·      Total amount of goods service producing within a country in a given year.

Tax

A payment to the government.

Distribution

Moving goods to market to be sold.

Consumption

·      Using up a good or service.

Tariff

·      Tax on imported goods.

Excise Tax

Tax placed on goods made, sold, and used within a country

Import

·      Bringing in products from another country.

Export

·      Selling goods to another country.

Blockade

·      Something that prevents goods and people from moving in and out of an area.

Embargo

·      Stop buying or selling goods to another country; sometimes countries set up a blockade

Productive resources

·      land, labor, and capital

Choice

·      Someone is faced with 2 or more alternative uses of a resource.

Opportunity Cost

·      Second choice; what was given up; Best choice not taken.

Decision

A conclusion reached after considering alternatives and their results.

Monopoly

When only one producer makes a product; leads to high prices; no competition.

Interstate Commerce

Trade between the states; national government regulates.