Unit 1

The level of economic prosperity

• profit

• wealth

• standard of living

• innovation

the income people receive for supplying factors of production

• factor payments

• wealth

• profit

• standard of living

Each society answers the three basic economic questions based on

• its unique combination of values and goals

• its degree of economic growth

• the number of factor payments

• the desire to achieve economic freedom

To improve its standard of living, a nation’s economy must

• remain stable

• grow through innovation

• achieve economic equity

• allow the central government to make economic decisions

The ways in which factors of production are combined determines the answer to which question?

• What will be produced?

• How will goods be produced?

• Who will consume the goods?

• How can we provide a safety net?

Where firms purchase the factors of production

• Market

• Factor Market

• Product Market

• Incentives

A hope of reward that encourages someone to behave in a certain way

• Profit

• Incentive

• Self-Interest

• Consumer Sovereignty

Producing only what you are good at

• Incentive

• Specialization

• Specialized Markets

• Self-Interest

Why do people need to buy and sell goods or services?

• People need to make a profit

• People need a competitive society

• No one is completely self-sufficient

• People need to provide the market with goods

Who owns the factors of production?

• Individuals

• Households

• Firms

• The Market