Types of Economies:
The three different types of economies are command, market, and traditional. Each
economy answers three economic questions.
1.) What to produce,
2.) How to produce,
3.) For whom to produce.
Command: Market: Traditional:
Government decides The people decide Whatever their ancestors did, that decides
1.) What to produce 1.) What to produce 1.) What to produce,
2.) How to produce, 2.) How to produce, 2.) How to produce,
3.) For whom to produce. 3.) For whom to produce. 3.) For whom to produce.
Sometimes, economies aren't purely one economy, and mix economies' characteristics together. These economies are called a mixed economy. Most economies are like this. Most of the time, mixed economies have some people control and some government control, but is not always like this. Mixed economies can have characteristics of all three economies.
Trade:
Specialization is a huge part of trade, because trade between countries would be limited if all countries sold the same thing. If a country specializes in a certain product or good, it encourages trade because the country is known for it, so more countries will want to trade with them.
Trade Barriers:
Tariff- A tax on a trade.
Quota- A limited number of products that can be traded.
Embargo- A complete stop on all trade from a certain country.
International trade requires a system for exchanging currencies between nations because all currency does not equal the same. For example, if the U.S.A wants to buy sugar cane from a farm in China, they would have to exchange their US dollars for yuans, Chinese currency.
Importance of Human Capital, Capital, Natural Resources, and Entrepreneurship in an Economy:
Human Capital and GDP have absolutely everything to do with each other. Without human capital, GDP would not be able to take place. If a country invests in their human capital, it results in a higher GDP. If a country does not invest in their human capital, then the GDP will in fact go lower and continually go lower. It is the same thing with capital and GDP. If a country does not invest in new machinery, technology, etc., its GDP will go down continually. If a country does invest in capital, then the GDP will go up, and will continue going higher if the country continually invests in their capital. Natural resources have a huge impact as a role in the country because without natural resources, you wouldn't make nearly as much as you would if you did have natural resources. Countries like Japan have very little arable land, resulting in little natural resources. Even though they don't have many natural resources, their technology industry and entrepreneurship is vital to the economy. Entrepreneurship is when an individual creates their own business. Entrepreneurship is a huge part in an economy, because without it, we wouldn't have many of the companies we do today that provide important things.
The three different types of economies are command, market, and traditional. Each
economy answers three economic questions.
1.) What to produce,
2.) How to produce,
3.) For whom to produce.
Command: Market: Traditional:
Government decides The people decide Whatever their ancestors did, that decides
1.) What to produce 1.) What to produce 1.) What to produce,
2.) How to produce, 2.) How to produce, 2.) How to produce,
3.) For whom to produce. 3.) For whom to produce. 3.) For whom to produce.
Sometimes, economies aren't purely one economy, and mix economies' characteristics together. These economies are called a mixed economy. Most economies are like this. Most of the time, mixed economies have some people control and some government control, but is not always like this. Mixed economies can have characteristics of all three economies.
Trade:
Specialization is a huge part of trade, because trade between countries would be limited if all countries sold the same thing. If a country specializes in a certain product or good, it encourages trade because the country is known for it, so more countries will want to trade with them.
Trade Barriers:
Tariff- A tax on a trade.
Quota- A limited number of products that can be traded.
Embargo- A complete stop on all trade from a certain country.
International trade requires a system for exchanging currencies between nations because all currency does not equal the same. For example, if the U.S.A wants to buy sugar cane from a farm in China, they would have to exchange their US dollars for yuans, Chinese currency.
Importance of Human Capital, Capital, Natural Resources, and Entrepreneurship in an Economy:
Human Capital and GDP have absolutely everything to do with each other. Without human capital, GDP would not be able to take place. If a country invests in their human capital, it results in a higher GDP. If a country does not invest in their human capital, then the GDP will in fact go lower and continually go lower. It is the same thing with capital and GDP. If a country does not invest in new machinery, technology, etc., its GDP will go down continually. If a country does invest in capital, then the GDP will go up, and will continue going higher if the country continually invests in their capital. Natural resources have a huge impact as a role in the country because without natural resources, you wouldn't make nearly as much as you would if you did have natural resources. Countries like Japan have very little arable land, resulting in little natural resources. Even though they don't have many natural resources, their technology industry and entrepreneurship is vital to the economy. Entrepreneurship is when an individual creates their own business. Entrepreneurship is a huge part in an economy, because without it, we wouldn't have many of the companies we do today that provide important things.