Chapter 1 - The Capitalist Economy

Question 1

Economics

Answer 1

The study of how people interact with each other, and with the natural environment.

Question 2

Capitalism

Answer 2

An economic system in which private property, markets and firms play a major role.

Question 3

Industrial Revolution

Answer 3

A wave of technological advances starting in Britain in the 18th century, which transformed Britain into a commercial and industrial economy.

Question 4

Technology

Answer 4

The process of converting inputs into outputs.

Question 5

Economic System

Answer 5

A way of organising the production and distribution of goods and services in the entire economy.

Question 6

Institutions

Answer 6

The laws and social norms governing the process of production and distribution (who gets what) of goods and services, and how these change over time.

Question 7

Private property

Answer 7

The right and expectation that one can enjoy one’s possessions in way that you choose, exclude others from their use, and dispose of them by gift or sale to others who then become their owners.

Question 8

Markets

Answer 8

These allow people to exchange products and services for their mutual benefit.

Question 9

Firm

Answer 9

A business organisation which employs people, and purchase inputs, to produce and market goods and services at prices that more than cover the cost of production.

Question 10

Capitalist Revolution

Answer 10

Rapid improvements in technology combined with the emergence of a new economic system.

This has led to a “connected world”, but also rising populations and as a result, fossil fuel use.

Question 11

Democracy

Answer 11

A political system defined by individual rights, in which virtually all adults are eligible to vote and in which the loser leaves office.

Question 12

GDP

Answer 12

A measure of total output in the economy in a given period.

Question 13

Growth Rate

Answer 13

Change in GDP/Original Level Of GDP

Question 14

Disposable Income

Answer 14

This is a measure of the standard of living of a country. However is does not include wellbeing so be careful when using this as the only measure.

Question 15

The Gini Coefficient

Answer 15

This indicates how much transparency there is in Income or any other measure across the population.

No inequality = 0
Maximum inequality = 1

It is based on a statistical construct called the Lorenz Curve.

Question 16

The Lorenz Curve

Answer 16

This shows the entire population along the horizontal axis, going from the poorest to the richest.

The height of the curve at any point along the horizontal axis indicates the fraction of total income received by the fraction of the population given by that point on the horizontal axis.