Business incentives affect economic development by directly inducing employers to increase the jobs in a local economy. The incentive may be some reduction in taxes, such as a property tax abatement. We induce a business investment decision in a local economy.
How do prices act as an incentive for both producers and consumers?
Price acts as an incentive to consumers and producers. Higher (lower) prices require consumers to give up more (fewer) resources to obtain goods. Prices affect producers of goods by offering them greater benefits from production when prices increase or lower benefits when prices decrease.
Which of these groups respond to the incentive of higher profits?
The producers are likely to respond more to the incentive of higher profits because it increases their net worth. It makes them accept the risk of business. This incentive of higher profit will encourage them to develop new products.
How did heavy industry in the Soviet Union avoid competition that drives a free market economy?
How did heavy industry in the Soviet Union avoid the competition that drives a free market economy? The government discouraged competition by determining prices wages and products.
Who believes wealth should be evenly distributed?
Ch 2 Econ Terms
| A | B |
|---|---|
| consumer sovereignty | the power of consumers to decide what gets produced. |
| socialism | a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society. |
What is the invisible hand that regulates the free market economy?
Definition of ‘Invisible Hand’ Definition: The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand. Description: The phrase invisible hand was introduced by Adam Smith in his book ‘The Wealth of Nations’.
What three questions should all societies ask themselves when defining its economy?
In order to meet the needs of its people, every society must answer three basic economic questions:
- What should we produce?
- How should we produce it?
- For whom should we produce it?
