What are the three basic economic questions?
Key Terms
economic system
The structure of methods and principles a society uses to produce and distribute goods and services.
factor payments
The income people receive in return for supplying factors of production (land, labor, capitol).
profit
The amount of money a business receives - its expenses.
traditional economy
Relies on habit, custom, or ritual to answer the three basic questions (lacks innovation).
command economy
Controlled by the government (lacks freedom and growth) (is strong in security and equity).
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| Term | Definition |
|---|---|
What are the three basic economic questions? | What goods/services should be produced?, How should they be produced?, Who consumes these? |
economic system | The structure of methods and principles a society uses to produce and distribute goods and services. |
factor payments | The income people receive in return for supplying factors of production (land, labor, capitol). |
profit | The amount of money a business receives - its expenses. |
traditional economy | Relies on habit, custom, or ritual to answer the three basic questions (lacks innovation). |
command economy | Controlled by the government (lacks freedom and growth) (is strong in security and equity). |
market economy | Consumers and producers control the economy. |
mixed economy | The government provides some public goods and lets the consumers/producers control other aspects of the economy. |
economic social goals | Freedom, growth, efficiency, equity, security, stability, employment, environmental protection. |
standard of living | The level of prosperity. |
innovation | Bringing new goods/services into use. |
safety net | Programs to protect people in unfavorable economic conditions. |