What is the difference between a good that is a need and a good that is a want? Give an example of each. A good that is a need is necessary for survival, such as food, water, shelter, clothing, medical care, etc… A want is not essential to life but makes life easier or more interesting, such as radio or TV.

Why do all societies face the problem of scarcity? All societies face scarcity because all have unlimited wants and needs with limited resources.

What basic choices are faced by all societies? Each society must decide what to produce, how to produce it, and for whom to produce it.

Explain what the term labor means. The term labor means all the abilities and skills of people in a society.

How do the four factors of production interrelate? Land, which is a natural resource; capital, the tools and machinery/equipment used in producing goods; labor, people with their efforts and skills; and entrepreneurs, for who are risk-taking people in search of profits.

Why must producers make production choices? Producers must make production choices because of scarcity, or limited factors of production.

How does a production possibilities curve illustrate the decisions made in an economy? The production possibilities curve shows the maximum combinations of goods and services an economy can produce when all its productive resources are fully employed.

Why is it important to evaluate trade-offs and opportunity costs when making choices? Evaluating trade-offs- or alternative choices-and opportunity costs-or the next best alternative use of money, time, or resources-help one make a good decision.

Explain how productivity relates to market growth. Improving efficiency, or productivity, of the factors of production results in market growth.

Identify the key components of economic growth and explain how they function in an economy. Productivity determines how efficiently goods are produced. Specialization and division of labor enable labor to work more efficiently and cost-effectively. Human capital can be improved by education and training to make the labor force more productive. Economic interdependence leads to specialization and growth.

Why is economic growth important? (two reasons) Economic growth is important for two reasons. First, because of scarcity, everybody wants more goods and services in the future than they have now. Second, if the population keeps growing, there will be even more people wanting goods and services in the future.

How do businesses and individuals participate in both the product market and the factor market in an economy? Individuals earn income in factor markets when they sell their labor. Businesses hire workers, acquire land, and borrow money in the factor market. Businesses sell their goods and services in product markets, and individuals spend their income on those products.

How does the study of economics help you make better choices? The study of economics provides understanding of how things are made and sold, how incomes are earned and spent, how jobs are created, and how the economy works on a daily basis. This understanding helps people make the best choices on economic issues.

Define capitalism. Capitalism is an economic system in which private citizens own and use the factors of production for their own profit or gain.

What are the functions of an economic system? Economic systems are organized ways a society provides for the wants and needs of its people by answering the questions of what, how, and for whom to produce.

What are the differences between a market economy and command economy? In a market economy, people are free to make their own decisions. A market economy has a high degree of freedom. A market economy also allows for individual ownership of resources. In a command economy, a central authority makes decisions. A command economy has a low degree of freedom. A command economy also has a central authority that owns the resources.

Explain what the allocation of goods under communism means. Under communism, goods and services are distributed to all people, and everyone consumes according to their needs. The government controls what is sold, how much is sold, and for what price.

What are the advantages and disadvantages of a mixed economy? Advantages of a mixed economy: the economy grows faster and protects the most vulnerable citizens. Disadvantages of a mixed economy: cost of services leads to high taxes.

What is a mixed economy and why are most economies in the world today considered mixed economies? A mixed economy is one in which one type of an economy comes into contact with another type of economy. A mixed economy has characteristics of at least two different types of economies. Most economies are considered mixed because most have some portion of the means of production under government control. Most economic systems also have some element of the market or capitalism.

How are vouchers used in the privatization process? The government distributes these vouchers to citizens so that they can gain a share of ownership of businesses that were once state-owned.

What are the common features of the transition to capitalism? State-owned property is privatized. Government gives up a measure of power and control on one hand and provides aid to certain industries on the other.