Lack of capital Economic Systems Traditional Economy rural agrarian few exist

Lack of capital economic systems traditional economy

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Lack of capital Economic Systems: Traditional Economy – rural, agrarian few exist Planned Economy – control by government over – who, what, how, price o Communist System – complete control o Socialist System – government control of social services and utilities Market Economy – individuals decide on all aspects of business o Free market o Free enterprise o Capitalist systems Mixed Economy – combination of Planned Economy and Market Economy – economic decisions made by business individuals with some government control and oversight (US, Great Britain, Germany) Market Forces – Set Prices – thru the Laws of Supply and Demand Demand is willingness and ability for consumer to buy goods and services Supply is willingness and ability of producer to produce goods and services Law of Supply – producers will produce more products as price increases and less product as the price decreases Law of Demand – consumers will buy more products as price decreases and less as the price increases Equilibrium Point or Market Price – a point at which a balance between supply and demand is reached Supply curve – indicates the amount of goods or services offered at differet price points Demand curve – show how many products will be bought at different prices More demand than supply – shortage More supply than demand – surplus Supply Factors –
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Changes in the price of raw materials Forecast of future prices (up or down) Technology changes Competitors (increase and decrease) Price of substitute goods Demand Factors- Income distribution (increase or decrease) Consumer preferences Population age and distribution Demand for Substitute goods (increase or decrease) Characteristics of Market Economy and Mixed Economy Competition (see below) Right to own property Freedom of choice in buying and selling goods and services Profits Types of Competition o Monopoly – lack of competition – one dominant supplier to an industry, controls pricing o Monopolistic – several producers make similar products that are perceived as slightly different o Oligopoly – few producers, little differentiation of product o Perfect – many producers no perceived differences Aggregate Output – total amount of goods and services produced in an economy in a given period (GDP) Gross Domestic Product – total value of all goods and services produced domestically in a given period (goods produced outside of the country are not included) (GNP) Gross National Product – total value of all goods and services produced by a nation’s companies regardless of where the facility is located in a given period of time (less accurate) (CPI) Consumer Price Index – based on the market price of a basket of goods and services vary from month to month (food, housing, clothing, transportation, medical care, recreation, education, and misc. items, such as haircuts and cigarettes) (PPI) Producer Price Index – measurement of selling prices received by domestic producers of goods and services for their products, includes prices for raw materials, component goods, and finished goods
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