Glossary
Command Economies
These are economic systems where the government or a central authority makes the major decisions about what, how, and for whom to produce.
Example:
Historically, the Soviet Union operated as a Command Economy, with central planners dictating the production quotas for factories.
Core Economic Questions
These are the three fundamental questions (what, how, and for whom) that every society must answer regarding the allocation of its scarce resources.
Example:
Every country, whether it's deciding to build more schools or more military equipment, is grappling with the Core Economic Questions.
Distribution
This is the process by which goods and services, or the income to acquire them, are allocated among individuals or groups within an economy.
Example:
Progressive taxation policies aim to influence the Distribution of wealth and income more evenly across society.
For Whom to Produce?
This economic question concerns how the goods and services produced will be distributed among the population, determining who gets to consume them.
Example:
A government's decision on whether to provide universal healthcare or allow private insurance to dominate impacts the For Whom to Produce? question for medical services.
How to Produce?
This economic question focuses on the methods and resources that will be used to create goods and services, including technology and labor versus capital intensity.
Example:
A clothing company deciding whether to use automated machines or skilled manual laborers to sew garments is addressing the How to Produce? question.
Industry Structure
This refers to the organization and characteristics of a market, including the number of firms, the nature of competition, and barriers to entry, which influence firm behavior.
Example:
The Industry Structure of the smartphone market, dominated by a few large players, is very different from the highly competitive restaurant industry.
Market Economies
These are economic systems where decisions about production, distribution, and prices are primarily determined by the interactions of buyers and sellers in markets, guided by supply and demand.
Example:
In a Market Economy, if consumers suddenly want more electric cars, producers will likely respond by increasing their output to meet that demand.
Production Methods
These are the specific techniques, technologies, and combinations of inputs (like labor and capital) employed in the process of creating goods and services.
Example:
The shift from hand-weaving to power looms represented a significant change in Production Methods during the Industrial Revolution.
Scarcity Challenge
This refers to the fundamental economic problem that human wants for goods, services, and resources exceed what is available, necessitating choices.
Example:
Even if you have a million dollars, the fact that there isn't enough time in a day to do everything you want illustrates the Scarcity Challenge.
What to Produce?
This fundamental economic question addresses which goods and services an economy will create given its limited resources and unlimited wants.
Example:
A society facing a choice between producing more public parks or more private housing is answering the What to Produce? question.