Economic Decisions 11a
People make choices about how to use _____________limited resources________________________,
decide the _______ownership___________ of resources, and structure markets for the distribution of
_________goods and services_______________.
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Match the following terms with their definitions:
____H____the inability to satisfy all wants at the same
time.
____F____ the amount of money exchanged for a good
or service.
____A____selecting an item or action from a set of
possible alternatives.
____I____the amount of a good or service that
producers are willing and able to sell at a certain price.
____B____the amount of a good or service that
consumers are willing and able to buy at a certain price.
A. Choice
B. Demand
C. Consumption
D. Incentives
E. Opportunity Cost
F. Price
G. Production
H. Scarcity
____J____factors of production that are used in the
production of goods and services (natural, human,
capital, entrepreneurship).
I. Supply
J. Resources
____C____using goods and services.
____D____things that incite or motivate; used to change
economic behavior.
____E____what is given up when a choice is made – the
highest valued alternative forgone.
____G____the combining of human, natural, capital, and
entrepreneurship resources to make goods or provide
services.
Comparing the Differences (11b)
Every country must develop an economic system to determine how to use its limited resources. The key factor in
determining the type of economy a country has is the extent of _________government involvement_________.
Each type of economy answers three basic questions differently.
What will be produced?
Who will produce it?
For whom will it be produced?
Characteristics of Major Economic Systems
(No country relies exclusively on markets to deal with the economic problem of scarcity.
Traditional Economy
Free Market
Command Economy
Mixed Economy
Economic decisions are
___Private_______
Central ownership
Individuals and businesses
based on custom and
ownership of
(usually by
as owners and decisions
_____historical______
property/resources
__government__) of
makers for the
precedent.
property/resources
__private____ sector
__Profit_____motive
People often perform the
__Centrally________Government as owner
__Competition_____
same type of
planned
economy
and decision maker for
Consumer
____work______ as their
the __public____ sector
Lack of
sovereignty
parents and grandparents,
___consumer_______
Government role is
(consumer is king)
regardless of ability or
choice
greater than in a free
Individual
potential.
market economy and less
___choice_________
than in a
Minimal
___command_______
___government____
economy.
involvement in the
Most economies today
economy
(including the __United__
___States________) are
mixed economies.
Characteristics of the United States Economy (11c)
 The United States economy is primarily a free market economy; but because there is some government
involvement it is characterized as a _____mixed economy______________. Government intervenes in a
market economy when the perceived benefits of a government policy outweigh the anticipated costs.
 Markets are generally allowed to operate without undue _____interference________ from the government.
Prices are determined by supply and demand as individual buyers and sellers interact in the marketplace.
 Private property – Individuals and businesses have the right to own real or personal ____property_______
as well as the means of production without undue interference from the government.
 Profit – Profit consists of earnings after all ____expenses_________ have been paid.
 Competition – Rivalry between producers/sellers of a good or service usually results in ___better quality___
goods and services at ______lower______ prices.
 Consumer sovereignty – consumers determine through _____purchases______ what goods and services will
be produced. Government involvement in the economy is _____limited______. Most decisions regarding
production of goods and services are made in the ____private______ sector.