Ch.3 Flashcards
mixed economy
a system that combines a goods measure of free enterprise in some areas with heavy state regulation in others
labor
any work that contributes to the production of goods and services
subsistence economy
an economic system that provides barely enough to keep a society alive
private capitalism
economic system in which the majority of a nation’s capital is owned and controlled by private individuals with businesses
state capitalism
a system in which the owner of much of a nation’s capital is a powerful, centralized apparatus called the collectivist state
capitalist
an individual who own capital good or owns a share of some business that produces goods
entreprenuer
a person who undertakes the management and financial risk of an economic enterprise
factors of production
- natural resources
- labor
- capital
- entrepreneurship
- information
information
facts and figures used to enhance the combination of the factors of production
cyber economy
system that emphasizes the role that information plays in its use with the factors of production
economic successes depends on
the intelligent combination of the factors of production
traditional economy
an economic system in which decisions involving the production, distribution, and consumption of goods are based upon custom heredity and caste
common economy
economic system in which a centralized authority controls the production, distribution, and consumption of goods as well as savings, investments, and prices; also called planned or directed economy
free enterprise economy
a system in which people are free to make their own economic choices; also called market economy
natural resources
land and other raw materials that can be used in the production process.
raw materials can be
mineral, from animals, or from plants
the industrial revolution
began: England 1760
freed many people from working the land because of labor saving devices
labor
any work that contributes to the production of goods and services.
free labor vs forced
free:
-More productive
-More motivating to work for your own advantage
-Better attitudes
-Wages based on skill
-Usually market economies
forced:
-Fixed wages
-Can’t have free labor unions
-Usually command economies
labor is more efficient in
economies that offer substantial rewards for good work
for successful production
skill and personal competence are required. leads to higher wages and salaries
a lack of capital goods
less consumer goods and more poverty
private capitalism and state capitalism
allow for productive interprises
capitalists of paid
dividends/ interest for the use of their capital rather than being apart of the business that uses their capital.
Robinson Crusoe
was a capitalist because he used capital goods to survive for more than 28 years. For example, he used a raft to transport necessary items, chests to store food and other supplies, carpenter’s tools, and hunting supplies.
entrepreneurship
the intelligent direction and supervision of natural and human economic resources.
entrepreneurs
join together the production factors and makes possible large-scale production and distribution. take risks because they could either fail the demands of the market and be ruined or they could succeed and grow rich
E.I du Pont
live: 1771-1834
entrepreneur because: He recognized that America needed better gunpowder and that he could make it for a low price and make a large profit, so he became a gunpowder entrepreneur. From this idea, he took action and set up a powder mill. Over the years he was able to greatly increase his profit. Du Pont’s descendants built on what their ancestors’ accomplishments. The du Ponts skillfully managed their business and took risks.
the proficiency of a market economy is owed to
capitalism’s basic components: property rights, freedom of enterprise and competition in a market environment, and limited government
cornerstone of capitalism
the right of the individual to own property
property rights
gives people the incentive to invest, save, build, create, and take entrepreneurial risks
real property
tangible items, such as land and buildings, owned by firms or individuals
financial property
money-based items such as cash, savings accounts, and other investments, that are owned by firms or individuals
intellectual property
items that result from creative labor, such as songs or computer programs
freedom of enterprise and competition
allows people to use their property how they want. only possible with a limited government
majority of the economic decisions in a free market
are made by private households and private businesses
resource market
that part of a market in which factors of production are sold
product market
the part of the market in which consumer products are sold
without free market
there is not enough information to make sound decisions. As people come together, share their knowledge and resources, and make informed choices, they form an enterprising economy working to benefit all.
I, Pencil
This essay highlights the fact that the making of a pencil and any other goods is a complex process. Many skilled laborers are involved. An invisible hand brings people, with many different skills who are working to earn money, to help in the process of making something like a pencil. People should have faith in the free man to respond to the invisible hand.
