Economic Terms to Know

Social Studies Class

Economic Systems

Market Economy• Is a system managed by the

people.• Based on supply and demand.

I love Doritos!!! And so does everyone else!!!

Doritos has increased sales!!! Because people can’t resist them!!!

Doritos increases their prices!!! Until.. People do not buy as many Doritos

Command Economy

• The government controls the economy

• Government controls:– What goods and services are

sold.– What jobs people can have.

Traditional Economy• Economy based on traditions,

routines, and beliefs.• The product is usually sold in a

market.• EX: African village that makes pots.

Mixed Economy• It is a mixture of state and

private ownership and control.• There are few countries that

have pure traditional, market, or command economies.

• Most economies are mixed.

The post office is run by the government!

Farmers Markets are run by the people.

Railways can be run by the government.

Trade Barriers

Trade Barriers

• Embargos are when one country refuses to trade with another country.

• Tarriffs are taxes on imported goods. The point is to increase the cost so consumers will purchase goods made in the home country.

• Quotas are a limit on the amount that can be imported. The point is to increase the price and limit the quality so consumers will purchase goods made in the home country.

GDP

GDP• GDP is the sum of goods and services

produced in an economy during a period of time (usually a year).

• The Gross Domestic Product measures the value of economic activity within a country.

GDP

Specialization

• Specialization is when a country specializes in producing only one product. For example, OPEC specializes in petroleum.– Benefits & Problems: • You produce more than anyone else, if anyone else

even produces it.• You can name your price.• When demand for that product goes down or the price

drops, you go into a recession.

Diversity

• A country’s economy is diverse when it produces multiple products. – Benefits & Problems• Less control over prices• More stability if demand for one product goes down

Imports & Exports

• Imports are goods and services coming into a country from another.

• Exports are goods and services going from the home country to another.

• To have a high GDP, you need to be exporting more than you are importing.