4 Allocation Flashcards
efficient allotment and division of resources
allocation
process of identifying how scarce resources are to be apportioned
allocation
no central control; decisions based on socio-cultural system shaped by customs, traditions, and religious beliefs
traditional economic system
trading system is direct (barter)
traditional economic system
for barter to push through, what must occur?
double coincidence of wants and needs
stability and continuity are more important than innovation and change
traditional economic system
no concept of private property
traditional economic system
roles based on gender and status
traditional economic system
centralized decision-making – an advantage that produces rapid changes in their society
command economic system
individuality, innovation, and variety are completely lacking
command economic system
including most ancient civilizations and the communist countries of today
command economic system
central gov’t that owns the means of production and decides distribution of goods
socialism
contributes according to ability and gets back according to what you need
communism
contributes according to ability, distributed equally
socialism
freedom to choose whichever religion you want to believe in
socialism
NO GOVERNMENT; everything collectively owned by society
communism
rejects all forms of religion
communism
complete lack of centralized decision-making
market economic system
individuals act on own free will as buyer and seller; decide the economic activities to satisfy their own “self-interest”
market economic system
regulate the market
invisible hands
doctrine of “laissez faire”/”hands off” policy, where gov’t doesn’t interfere
market economic system
pros of market economic system
greater variety of products, better quality due to self-regulation (supply and demand, price and quantity), rewarding innovation and efficiency
cons of market economic system
labor exploitation, false advertisement, safe and ineffective products, some people can’t realize benefits of this system
goal is to profit
capitalism
adam smith wrote “an inquiry to the nature and causes of the wealth of nations”
capitalism
father of capitalism
adam smith
divides people into classes; capitalist and working class
capitalism
market economy, minimal government intervention
capitalism
specialization, division of labor, capital expansion
capitalism
“pure altruism is not possible in economics”
self-interest
being selfish is OK; it boosts the economy
adam smith
being selfish is NOT OK, if we don’t think about others, the rich get richer, the poor get poorer
karl marx
