Economics Flashcards
Economics
Study of how people/societies use limited resources to satisfy unlimited wants.
What kind of science is Economics?
A social science, that studies the production, distribution, and consumption of goods/services
Basic problems that every economy seeks to answer?
1) What goods and services should be produced?
2) How should these goods and services be produced?
3) Who will consume these goods and services?
Law of Supply
As the price goes up, the quantity goes up
Law of Demand
As the price goes up, the demand goes down
Equilibrium Price
Businesses sell everything they make; consumers buy everything they want.
Product Market (PM)
Where goods are bought.
Factor Market (FM)
Where resources are bought.
Free-Enterprise
Economic system in which private businesses are able to compete with each other with little or no government control.
Laissez Faire
french term meaning let it be.
This refers to the “hands off” approach of government in a free enterprise economy
What 2 things do the gov’t use to measure the economy?
Inflation and Unemployment
Unemployment increases
inflation decreases
Unemployment decreases
inflation increases
Monetary Policy
means through which a central bank influences a nation’s money supply
Fiscal policy
means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
The law of diminishing marginal utility
States that the marginal utility of a good or service declines as its available supply increases
Types of economic systems
1) Traditional economic system
2) Command economic system (Communism)
3) Market economic system (Capitalism)
4) Mixed economic system
Mixed economic system
a cross between a market economy/ a command economy
Market economic system (capitalism)
an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.
(laissez faire)
Command Economic System (Communism)
- Controlled by a centralized power (government)
- This type of economy was the core of the communist philosophy
Traditional economic systems
subsistence economy, agrarian, small close knit societies
