Economic systems flashcards
What is an economic system
regulates the factors of production and is a system of production and exchange of goods and services as well as allocation of resources
What are the three types of economic systems
mixed, market , planned economy
what is a planned economy
government makes all the decisions about what goods and services are produced and how and who they are produced for. government owns factors of production, and aims to remove inequalities.
what are two similar forms of planned economy called
socialism and communism
what is the origin of a planned economy
industrial revolution changed the way people lived, workers moved to cities in poverty, socialistic polocies improved living conditions.
Who were the fathers of socialism
Karl Marx and Friedrich Engels
what are the characteristics of planned economy
government controls
no private property
limited job choice
basic needs to provide
Advantages of planned economy
health and education is prioritized
equal education
low unemployment
equal income
Disadvantages of a planned economy
lack of innovation
poor quality goods
limited choices
What is market economy
private ownership
profit driven
no government production
private services and decision making
origin of market economy
originated in 1700’s
government imposed restriction on trade
Adam Smith argued these limitations
and promoted capitalism and invisible hand theroy
What is the invisible hand theory
where supply and demand naturally regulated markets with minimal government interference
characterisc of market economy
profit driven
entrepeneurship
labour freedom
taxation
Advantages of market economy
responsiveness
variety
innovation
profitability
Disadvantages of market economy
economic inequality
lack of public goods
exploitation pf workers
What is a mixed economy
blends private business and government control to balance growth
Advantages of a mixed economy
encourages competition
government ensures bublic services and regulates fairness
Disadvantages of a mixed economy
too much government control
wealth inequaltui and unemployment remain challenges
Origin of mixed economy
a mix of planned and market economies, combining their strengths to address economic challenges
characteristics of a mixed economy
capital sources
entrepeneurs decide what to produce
government spends taxes on what to produce
give me an example of capital sources
banks and shareholders
What is the economic problem
satisfaction of unlimited needs and wants with limited resources
Who was Adam Smith
He was a British sconomist, also the father of capitalism, and also in his book called the Wealth of nations in 1776
