Chapter 6: The role of markets in allocating resources Flashcards
Economic system
The institutions, organizations and mechanisms that influence economic behaviour and determine how resources are allocated
Planned economic system
An economic system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives
Directives
State instructions given to state owned enterprises
Mixed economic system
An economy in which both the private and public sectors play an important role
Market economic system
An economic system where consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned
Capital-intensive
The use of a high proportion of capital relative to labour
Labour-intensive
The use of a high proportion of labour relative to capital
Demand
The willingness and ability to buy a product
Supply
The willingness and ability to sell a product
Market equilibrium
A situation where supply and demand are equal at the current price
Market disequilibrium
A situation where supply and demand are not equal at the current price
