INTRO TO BUSINESS
CHAPTER 2 – ECONOMIC
1. Regardless of how a country lets its market operate, there are key
economic questions which must be answered because of ?
scarce economic resources
2. What are the 3 economic
What goods and services are to be
How should the goods and services be
For whom should the goods and
services be produced?
3. How do you determine what to produce?
Nations differ in their wants just as individuals do. Meeting some or
all of its people’s wants is a challenge. A country must learn how to
best use its resources.
Decisions must be made on which
kinds of goods and services are
valued the most and best serve the
4.. How do you determine how to
A country with a great many people but limited capital resources might
build roads by having many workers use equipment that requires
much manual labor. In another country road building may be
accomplished with only a few workers using labor saving equipment.
The second method is more effective the country does the job with
more capital resources and less labor.
Economic resources combine in different
ways to produce the same goods and
services. Each nation decides which
combination of resources will best suit its
5. How do you determine for whom
A nation must decide which of its citizens
should benefit from the production of goods
and services. It must also consider whose
needs and wants are the most critical.
How goods and services will be distributed. Should they be shared
equally among the people? Should people who contribute more get
more? If you have the money, shouldn’t you be able to buy anything
you want? A large share of a country’s resources may be used to
produce capital (tractors) and therefore limit the country’s production
of consumer goods. (CD players). As a result, consumer goods
6. What is an Economic system?
anation’s plan for answering the key
7. What are the 3 types of economic
custom based economy,
directed (planned) economy
8. What is meant by custom-based
goods are produced the way they have
always been produced. Handed down
generation to generation. Change and
growth occur slowly in countries
whose economies follow customs and
in which the people are poor in material
9. What is meant by directed or
resourcesare owned and controlled by
The officials of govt usually decide what and how
goods will be produced and how they will be shared.
They plan all phases of the economy and command
that the plans be carried out, using the military or a
police force to do so if necessary. The average
citizen has little to say about how these three
economic questions are answered. The freedom of
the people is always limited in this option.
10. What is meant by market economy?
an economy in which individuals are free to
engage in business transactions with buyers
who are willing and able to buy and sellers
who supply goods and services from which
they earn a profit. Generally found in
countries with democratic form of govt.
The 3 questions are answered by individuals
through buying and selling activities in the
11. What is meant by marketplace?
anyplace where buyers and sellers
exchange goods, services and some
form of money.
No one tells the consumer what to buy and
no one tells businesses what to make and
sell. Consumers and businesses make
economic decisions based on their own
12. What type of economic system
does the US have?
market economy or capitalism
13. What is meant by capitalism?
economic resources are usually
privately owned by individuals rather
than by the government. They are free
to decide what to produce with the
14. What is meant by free or private
the freedom of the individual to choose
what to produce.
They refer to a system in which most economic
resources are privately owned and decisions
about production and distribution are largely
made by voluntary exchange in the
15. What is meant by voluntary
buyers and sellers make their own
economic decisions to determine what
the price will be for goods and services
produced and sold
16. What are the five major features or
rights of our market economy?
freedom of choice
17. What is a business?
anestablishment or enterprise that
supplies us with goods and services in
exchange for payment in some form
18. What is private enterprise?
the right of the individual to choose whether to own a business,
what business to enter and what to produce with only limited
government direction. This private enterprise right ensures
your freedom to decide how you will earn a living as long as
you obey the law in doing so.
As a businessperson you are free to offer
goods and services
places of your choice.
Free to succeed or to fail in a business
There are some regulations that prevent you from performing activities that
would harm others. EX. Not dispose of chemical wastes to pollute
environment or practice surgery or medicine without a license
19. What does the right to private
you can own, use or dispose of things
You can sell them, give them away, throw them away --
as long as you don’t violate a law in doing so
20. Businesses also have right to own
property. What does it include?
thegoods the business produces
The right to dispose of their property in
any lawful way.
21. Why do business supply goods
and services to the marketplace?
To earn money.
22. What is meant by profit?
money left from sales after
subtracting all the costs of operating a
23. Why are business owners are
entitled to make profits?
a. they run the risk of losing the money
invested to start business
b. they face the extra hours of work and
stress in owning a business
24. What is meant by profit motive?
the desire to work hard and be creative
to earn a higher profit.
It helps make the economy strong. Because of it people are willing
to invest money in a business and to develop new products to
satisfy customer wants. Profit motive is not the only reason but it is
the heart of the private enterprise system. Also it can be
a. some enjoy bringing out new products or improve existing ones
b. pleasure from knowing what they do makes people happier
c. some like excitement of starting and running a new business
25. What is meant by competition?
the rivalry among businesses to sell
their goods and services to buyers.
You make choices by
comparing appearances, usefulness and appeal of the
goods and services
if not satisfied you can buy from someone else the next
26. What does competition
business owners to improve products,
offer better services,
keep prices reasonable
produce new things
27. What is meant by freedom of
have the right to buy where and
what you please