Chapter 2- The Market System And The Circular Flow Flashcards
Economic system
A privilege set of institutional arrangements and a coordinating mechanism
3 economic systems
1-Laissez-Faire capitalism
2- the command system
3- the market system
Laissez-faire capitalism
Minimal government interference
The command system
Government runs most things
The market system
Mixed economy
Market system characteristics
- private property
- freedom of enterprise and choice
- self-interest
- competition
- markets and prices
- technology and capital goods
- specialization
- use of money
- active, but limited, government
Private property
The right to own land, capital, and other property
Freedom of enterprise
Right to use resources to produce and sell in markets of choosing
Freedom of choice
Right to employ or dispose resources and for consumers to spend their money how they want
Self-interest
Most advantageous outcome
Competition
Freedom of buyers and sellers to have a market and compete
Market
An institution or mechanism that brings buyers and sellers together
Technology and capital goods
Promote efficiency and the ability to produce more goods and services
Specialization
The use of resources to produce one or a few goods and services rather than the entire range of products
Active but limited government
Government can sometimes increase the overall effectiveness of the economic system
