Chapter 2 - Economic Systems Flashcards
Economic system
A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem
Laissez faire capitalism
Market
Any institution of mechanism that brings together buyers and sellers of a particular good or service
Command system
A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities
Market system
All the product and resource markets of a market economy and the relationships among them, a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decision made by customers, firms and resource suppliers
Private property
The right of private persons and firms to obtain, own, control, employ, dispose and bequeath land, capital and other property
Freedom of enterprise
The freedom of firms to obtain economic resources, to use resources to produce products of the firms own choosing and to sell their products in markets of their choice
Freedom of choice
The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate
Self interest
That which each firm, property owner, worker and consumer believes is best for itself and seeks to obtain
Competition
The presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market
Specialization
The use of the resources of an individual, a firm, a region or a nation to concentrate production on one or small number of goods and services
Division of labour
The separation of the work required to produce a product into a number of different tasks that are performed by different workers
Invisible hand
The tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interest of society
Emerging markets
Emerging markets have a combination of the characteristics of free markets and command systems and are in the process of creating opportunities to become a developed nation
Medium of exchange
Any item sellers generally accept and buyers generally use to pay for a good or services, a convenient means of exchanging goods and services without engaging in barter.
Money
Any item that is generally acceptable to sellers in exchange for goods and services
Consumer sovereignty
Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy, consumers direction of production through their rand votes
Rand votes
The votes that consumers and entrepreneurs cast for the production of consumer and capital goods when they purchase those goods in product and resource markets
Creative destruction
