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WGU D 089 PRINCIPLES OF ECONOMICS STUDY GUIDE
NEWEST VERSION -2025/2026- 100+ QUESTIONS AND
VERIFIED ANSWERS 100% CORRECT GUARANTEED SUCCESS
Economic systems
A system of the production, resource allocation, and distribution of goods and
services within a society or a given geographic area
Traditional Economy
An economic system that relies on customs, history, and time-honored beliefs.
Tradition guides economic decisions such as production and distribution
Command Economy
An economic system in which production, investment, prices, and incomes are
determined centrally by a government
Market Economy
An economic system in which the decisions regarding investments, production,
and distribution are guided by the price signals created by the forces of supply
and demand
Mixed Economy
An economic system in which both private enterprise and a degree of state
monopoly (Usually in public services, defense, infrastructure, and basic industries)
co-exist
Marginal benefit
The incremental increase in the benefit to a consumer caused by the consumption
of one additional unit of a good or service
, 2
Principles of Economics #1
Everyone faces trade-offs
Principles of Economics #2
The cost of something is determined by what you give up to get it
Principles of Economics #3
Rational people think at the margin
Principles of Economics #4
People respond to incentives
Principles of Economics #5
Trade can benefit everyone
Principles of Economics #6
Markets are a sound method of organizing economic activity
Principles of Economics #7
Governments may be able to improve market outcomes
Principles of Economics #8
A nation's standard of living depends on it's ability to produce.
Principles of Economics #9
Printing too much money causes prices to rise
Principles of Economics #10
There is a short-run trade-off between inflation and unemployment
Five key characteristics of a Traditional Economy
1. It is centered around families or tribes.
2. It exists in a hunter-gatherer and nomadic society.
, 3
3. Trade is heavily dependent on bartering rather than money.
4. It only produces what is needed, and a surplus is very rare.
5. It eventually changes from purely trade to the use of some type of currency.
Advantages to a Traditional Economy
There is little competition or friction among members of the society.
People's roles and contributions are well understood.
It can be more sustainable than a technology-based economy.
Disadvantages to a Traditional Economy
It is exposed to environmental changes and weather patterns.
It is vulnerable to market of command economies, which consume and deplete
the resources or traditional economies.
Five key characteristics of a Command Economy
1. All economic activity is planned and controlled by a centralized government
power.
2. The government decides how to use and distribute the nation's natural, capital,
and labor resources.
3. A nation's central power controls the priorities for how goods and services will
be produced and distributed.
4. Domestic competition is overpowered as the government monopolizes
businesses considered essential for economic goals such as utilities, finance, and
automotive companies.
5. Businesses are required to follow specific hiring and production targets set by
the government. This creates regulations and directives to enforce the centralized
plan.
Advantages of a Command Economy
, 4
In this type of system, goods, services, and resources are deployed without
concern for environmental or other regulatory issues.
The government can transform the entire society to fit the constraints of its
national vision through nationalizing industry and deciding where workers will be
placed.
Disadvantages of a Command Economy
Underlying black market economies tend to develop as a response to difficult
access to goods and services.
Rationing commonly occurs due to poor planning and an inability to meet societal
demands.
People are discouraged from innovating and are required to follow orders and
keep with the central plan.
Five key characteristics of a Market Economy
1. Privately-owned goods and services are standard, and people and businesses
have the right to commercialize their property freely.
2. People can innovate, produce, sell, and purchase goods and services.
3. Prices, production, and job availability are driven by self-motivation and
competition, according to the laws of supply and demand.
4. The economy relies on market efficiency where producers and consumers have
access to the same information to make economic decisions.
5. Government interference is limited to regulating safety, fair access,
environmental, and national defense issues.
Advantages of a Market Economy
Goods and services are readily available because consumers and businesses have
the freedom to negotiate prices.
Production methods are efficient, which increases productivity and profitability.
WGU D 089 PRINCIPLES OF ECONOMICS STUDY GUIDE
NEWEST VERSION -2025/2026- 100+ QUESTIONS AND
VERIFIED ANSWERS 100% CORRECT GUARANTEED SUCCESS
Economic systems
A system of the production, resource allocation, and distribution of goods and
services within a society or a given geographic area
Traditional Economy
An economic system that relies on customs, history, and time-honored beliefs.
Tradition guides economic decisions such as production and distribution
Command Economy
An economic system in which production, investment, prices, and incomes are
determined centrally by a government
Market Economy
An economic system in which the decisions regarding investments, production,
and distribution are guided by the price signals created by the forces of supply
and demand
Mixed Economy
An economic system in which both private enterprise and a degree of state
monopoly (Usually in public services, defense, infrastructure, and basic industries)
co-exist
Marginal benefit
The incremental increase in the benefit to a consumer caused by the consumption
of one additional unit of a good or service
, 2
Principles of Economics #1
Everyone faces trade-offs
Principles of Economics #2
The cost of something is determined by what you give up to get it
Principles of Economics #3
Rational people think at the margin
Principles of Economics #4
People respond to incentives
Principles of Economics #5
Trade can benefit everyone
Principles of Economics #6
Markets are a sound method of organizing economic activity
Principles of Economics #7
Governments may be able to improve market outcomes
Principles of Economics #8
A nation's standard of living depends on it's ability to produce.
Principles of Economics #9
Printing too much money causes prices to rise
Principles of Economics #10
There is a short-run trade-off between inflation and unemployment
Five key characteristics of a Traditional Economy
1. It is centered around families or tribes.
2. It exists in a hunter-gatherer and nomadic society.
, 3
3. Trade is heavily dependent on bartering rather than money.
4. It only produces what is needed, and a surplus is very rare.
5. It eventually changes from purely trade to the use of some type of currency.
Advantages to a Traditional Economy
There is little competition or friction among members of the society.
People's roles and contributions are well understood.
It can be more sustainable than a technology-based economy.
Disadvantages to a Traditional Economy
It is exposed to environmental changes and weather patterns.
It is vulnerable to market of command economies, which consume and deplete
the resources or traditional economies.
Five key characteristics of a Command Economy
1. All economic activity is planned and controlled by a centralized government
power.
2. The government decides how to use and distribute the nation's natural, capital,
and labor resources.
3. A nation's central power controls the priorities for how goods and services will
be produced and distributed.
4. Domestic competition is overpowered as the government monopolizes
businesses considered essential for economic goals such as utilities, finance, and
automotive companies.
5. Businesses are required to follow specific hiring and production targets set by
the government. This creates regulations and directives to enforce the centralized
plan.
Advantages of a Command Economy
, 4
In this type of system, goods, services, and resources are deployed without
concern for environmental or other regulatory issues.
The government can transform the entire society to fit the constraints of its
national vision through nationalizing industry and deciding where workers will be
placed.
Disadvantages of a Command Economy
Underlying black market economies tend to develop as a response to difficult
access to goods and services.
Rationing commonly occurs due to poor planning and an inability to meet societal
demands.
People are discouraged from innovating and are required to follow orders and
keep with the central plan.
Five key characteristics of a Market Economy
1. Privately-owned goods and services are standard, and people and businesses
have the right to commercialize their property freely.
2. People can innovate, produce, sell, and purchase goods and services.
3. Prices, production, and job availability are driven by self-motivation and
competition, according to the laws of supply and demand.
4. The economy relies on market efficiency where producers and consumers have
access to the same information to make economic decisions.
5. Government interference is limited to regulating safety, fair access,
environmental, and national defense issues.
Advantages of a Market Economy
Goods and services are readily available because consumers and businesses have
the freedom to negotiate prices.
Production methods are efficient, which increases productivity and profitability.
