Economics
Chapter 1: Economics and Economic Systems - Study Guide
Name: _________________________________
1. Economics studies how individuals and societies seek to satisfy needs and wants through incentives,
choices, and the allocation of scarce resources.
2. List the 4 factors of production.
a. Natural Resources
b. Human Resources
c. Capital Resources
d. Entrepreneurial Resources
3. Capital Resources are used to produce goods and services.
4. Entrepreneurial Resources are able to recognize the need for new goods or service.
5. Natural Resources are raw materials found in nature that are used to produce goods.
6. Human Resources are people’s knowledge, efforts, and skills used to perform task or do work.
7. Nations use economic systems to determine how to use their limited resources effectively in order to reach the
primary goal of providing people with a basic standard of living.
8. List the four types of economic systems.
a. Traditional Economies
b. Market Economies
c. Command Economies
d. Mixed Economies
9. Traditional Economies are found in rural areas where customs govern economic decisions. These decisions are
centered around the family or ethnic units.
10. List 2 advantages of a traditional economy.
a. People have specific roles
b. Security in the way things are done
11. List 2 disadvantages of a traditional economy.
a. Technology is not used
b. Difficult to improve
12. In a Command Economy the government determines what, how, and for whom goods and services are
produced.
13. In a strong command economy the government makes all decisions, while in a moderate command some form
of private business exists but the state owns the major resources.
14. List 2 advantages of a command economy.
a. Guarantees equal standard of living for everyone
b. Less crime and poverty
Economics
Chapter 1: Economics and Economic Systems - Study Guide
Name: _________________________________
c. Needs are provided for through the government
15. List 2 disadvantages of a command economy.
a. Minimal choices
b. Fewer choices of items
c. No incentive to produce better product or engage in entrepreneurship
16. In a market economy businesses and consumers what will be goods and services will be produced or offered,
what price it will be sold for and in what quantities it will be bought.
17. The market economy is based on the law of supply and demand.
18. List 2 advantages of a market economy.
a. competition to have the best products and services
19. List 2 disadvantages of a market economy.
a. huge rift between wealthy and poor
20. A Mixed Economy combines both the command and market economy.
21. In a mixed economy government helps people with their needs while the marketplace (the business and
consumer relationship) offers ways to satisfy people’s wants.
22. List 2 advantages of a mixed economy.
a. balance of needs and wants met by government and in marketplace
23. List 2 disadvantages of a mixed economy.
a. citizens have to pay taxes