Economic Institutions Flashcards
involve formal exchanges, where money is used to buy goods and services
MARKET Transactions
These are transactions that do not entail the exchange of cash for the rendering of service or provision of goods.
Nonmarket Institutions
Types of Nonmarket Transactions
Reciprocity, Transfer, Redistribution,
exchange of goods or labor between individuals in a community
Reciprocity
redistribution of income that is not matched to actual exchange of goods and services
Transfer
collection of goods from members then ____ among the same members
Redistribution
encourages Private ownership, investments, innovation and maximization of resources and effective production, freedom of enterprise and choice.
Capitalism
self-interest and competition brings about a socially optimum result even in the absence of government control.
Invisible Hand Principle
a requirement for market economy which results to division of labor. It contributes to the efficiency of production and service provision.
Specialization
is a mechanism, not necessarily a place, which brings buyers and sellers together for a desired transaction.
Market
serve as signaling device to indicate the value of a good or service to both the buyers and the sellers and guide their actions on buying.
Prices
facilitates an easier exchange between transacting parties.
Money
The price of the good or service is determined by the forces of supply and demand.
Free Market Economy
when supply is higher than demand
Surplus
When demand is higher than supply
Shortage
only few seller or producer
Oligopoly
one seller due to level of capital required.
Monopoly
The central government takes over the functions of the market in producing and distributing essential goods and services.
Socialist Economy
