economic systems Flashcards
define and apply the factors and costs of production define and apply opportunity costs and the law of opportunity costs
Set of rules that defines how an economies resources are to be owned and how decisions about their use are to be made
overall method of doing business in a country
What is to produced
consumer goods
producer goods
military goods
the resources that are used to produce goods and services are
labor
land
capital
entrepreneurship
non-human resources fixed in supply (gifts of nature)
Includes real estate and natural resources within it
land
human effort put to service satisfying human wants (both physical and mental)
work time and effort that people devote to producing goods and services
labor
the quality of labor depends on ______, which is the knowledge and skill that people obtain from education, on the job training, and work experience
human capital
manufactures goods used in production and marketing of goods are services that are consumed
capital
Includes equipment, tools structures, machinery, and skills created to help produce good and services
capital
puts other factors together in proper proportions
entrepreneurial ability
takes the initiative
makes policy decisions
source of innovations
the risk bearer
entrepreneurial ability
Land earns ___
Rent
labor earns____
wages and salaries
capital earns ___
interest and dividends
entrepreneurship earns ____
profit
Price paid for use of land
rent
price paid for use of labor
wages and salaries
cost of financing capital goods
interest and dividends
price of successful management
profits
three basic types of economic systems
pure capitalism, using marker mechanism
government directed systems
a mixture of both
market system
private ownership of resources and use of system of markets and prices to coordinate economic activity
private owners have power to make decisions about their use
each individual acts in his/her own self interest
pure capitalism
the use of market prices and sales to signal desired outputs and resource allocations
the market mechanism
public ownership of virtually all property resources and economic decision-making through central economic planning
command economy
combination of the two— private markets and government involvement
mixed system
production methods, exchange of goods and distribution of income are all sanctioned by custom or tradition
traditional economy
Markets and prices coordinate economic activity
economy is self-regulating
…
characteristics of market system
private property freedom of enterprise and choice self-interest competition markets and prices coordinate economic activity limited government
people can obtain, control, use and dispose of the property resources they own
private property
private individuals can become entrepreneurs (or fail at it)
freedom of enterprise and choice
primary, driving force in market system
self interest
controlling mechanism of system
competition
