3 Flashcards
economic systems have to answer
what to produce, how to produce it, and who to produce it for
economic systems come down to
who owns the factors of production: the main inputs needed to produce goods. These are defined by karl marx as land, labor, and capital
communism
socioeconomic system in which private property and class are abolished, the factors of production are collectively owned, and output is distributed equally
command economy
factors of production are owned by the government and they determine what to produce, how, and for who
market economies
factors of production are privately owned. Public demand (the invisible hand) determine what to produce and for who. Since demand drives production and creates profit for companies who produce the most desirable good, resources are allocated to the good most people desire and are used efficiently
the invisible hand
the idea that businesses meet societies needs when they seek their own self interest
“it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”
gov’t role in economies
the government sets regulations for specific goods, determines how workers should be treated, enforces it laws and regulations to ensure safety and order
circular flow diagram
shows the interaction between households, businesses, and the government in the economy. Businesses sell goods to households in the product market, households sell their labor to businesses in the resource market, and the businesses use the labor to produce goods while households use their wages to pay for goods. The government gains money from taxing businesses and households as well as borrowing and then gives back when it offers subsidies to businesses or purchases goods or services from them and when they provide transfers to poor households or hire them for government jobs
deng xiaoping
paramount leader of the People’s Republic of China from 78’ to 89’ who reformed China’s economy into a socialist market economy
