chapter 1 Flashcards
What is economics?
The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.
What is macroeconomics?
The part of economics study that looks at the operation of a nation’s economy as a whole.
What is microeconomics?
The part of economics study that looks at the behavior of people and organizations in particular markets.
What is resource development?
The study of how to increase resources and to create conditions that will make better use of those resources.
What did Thomas Malthus believe?
If the rich had most of the wealth and the poor had most of the population, resources would run out.
What is the ‘invisible hand’?
The process that turns self-directed gain into social and economic benefits for all.
What is capitalism?
An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit.
What is state capitalism?
A combination of freer markets and some government control.
What are the four basic rights under free-market capitalism?
- The right to own private property.
- The right to own a business and keep all that business’s profits.
- The right to freedom of competition.
- The right to freedom of choice.
How do free markets work?
Decisions about what and how much to produce are made by the market.
What determines market price?
By buyers and sellers negotiating in the marketplace.
What is supply?
The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time.
What is demand?
The quantity of products that people are willing to buy at different prices at a specific time.
What is the equilibrium point?
The price determined by the intersection of supply and demand.
What is perfect competition?
Many sellers but none is large enough to dictate the price of a product.
What is monopolistic competition?
A large number of sellers produce very similar products that buyers perceive as different.
What is oligopoly?
A few sellers dominate a market.
What is a monopoly?
One seller controls the total supply of a product or service and sets the price.
What are the benefits of free markets?
- Allows for open competition among companies.
- Provides opportunities for poor people to work their way out of poverty.
What are the limitations of free markets?
- Leads to inequality as business owners and managers usually make more money and have more wealth than lower-level workers.
- People may start to let greed drive them.
What is socialism?
An economic system based on the premise that some, if not most, basic businesses should be owned by the government.
What are the benefits of socialism?
- Social equality.
- Free education.
- Free health care.
- Free child care.
- Longer vacations.
- Shorter work weeks.
- Generous sick leave.
What are the drawbacks of socialism?
- Few incentives for businesspeople to take risks.
- Brain drain — The loss of the best and brightest people to other countries.
- Fewer inventions and less innovation.
What is communism?
An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.
