Economics And Choice Flashcards
What is an Economic System?
The way a society uses its scarce resources to satisfy its people’s unlimited wants
What is competition?
Involves all the actions sellers do to get buyers to purchase their products
What is a Laissez Faire?
Principle that government should not interfere in the market place
“Leave it alone” or “hands off”
What does privatize mean?
To change from government or public ownership to private ownership
What does nationalize mean?
To change from private ownership to government or public ownership
What is product market?
Market for goods and services
Set of activities in which people buy goods and services
What is specialization?
A situation in which people concentrate their efforts in activities they do best.
- It allows people to trade what they can most efficiently produce
- Removes need for households to be self sufficient
- allows households to trade for what they need
What is voluntary exchange?
A trade in which both traders believe what they are getting is worth more than what they are giving up
- Based upon self interest
- Buyers seek products and services that satisfy their wants and sellers seek profit
What is a command economy?
The central government makes ALL decisions in the production and consumption of goods and services
What are positive aspects of a command economy?
The government is able to distribute resources equally among society
What are negative aspects of a command economy?
Inefficient because
- Unfair, flawed government decisions
- lack of motivation of people to work
- Lack of individual freedom
What is a market economy?
Decisions on production and consumption of goods and services are based on voluntary exchange in markets
What are positive aspects of a market economy?
Individual freedom to act in ones own self interest
-most efficient use of resources
What are negative aspects of market economy?
Some individuals act destructively toward themselves and toward others
- Uneven distribution of resources among different groups in society
- Some needs not met, if they don’t coincide with the needs f the majority
What is a traditional economy?
Relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
Positive aspects of traditional economy?
Clearly Answers the three economic questions (who, how, what)
-economic decisions are based on tradition and custom
Negative aspects of traditional economy?
Less productive because they resist change and tradition and custom flood the job market
-fewer people are able to attain wealth
What is another name for a command economy?
Communism
Socialism
Democratic socialism
Where is the real power found In a market economy?
It is by the consumers
-Consumer Sovereignty
Customers have ultimate control over what is produced Bc they are free to buy and reject what they want.
In which type of economy do producers and consumers drive the economy?
Market economy Bc they can do what they want
Who was Karl Marx?
German philosopher, historian, economist
AKA the “father of communism”
Influenced the Russian Revolution of 1917 and Chinese Revolution in 1949
What was Karl Marx’s theory?
He thought there were 2 social classes (Worker and Owner) -owners exploited workers XKeep wages low Xsell products and high prices -Tension would rise between worker and owner and overtime the workers would revolt and create a new society without classes. (Co wrote the communist Manifesto)
How many pure market economies exist today?
Few to none
What is a mixed economy?
An economic system that has elements of traditional, command, and market economies
- is also the most common economy today
- Often emphasize one type of economy more than the others
What is a global economy?
All economic interactions that cross international borders
What is the Circular Flow model?
It visualizes how all interactions occur in a market economy
Two decision makers
-Households
-Businesses
Shows the two markets in which households and businesses meet.
What is a factor market?
Market for the factors of production.
-businesses purchase the factors they need from the factor market
