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. Types of Economies
Every country m ust develop an economic system to determine how to use its limited productive
resources. The key factor in detemrine the type of economy is the extent of __government
involvement_. 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 economies
No country relies exclusively on markets to deal with the economic problem of scarcity.