EKN Chapter 2 Flashcards
Economic system
A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types.
Market
Any institution or mechanism that bring together buyers and sellers of a particular good or service.
Command system
A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities; command economy; communism.
Market system
All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decisions made by consumers, firms and resource suppliers.
Private property
The right of private persons and firms to obtain, own, control, employ, dispose of and bequeath land, capital and other property.
Freedom of enterprise
The freedom of firms to obtain economic resources, to use those resources to produce products of the firms own choosing and to sell their products in markets of their choice.
Freedom of choice
The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate.
Self-interest
That which each firm, property owner, worker and consumer believes is best for itself and seeks to obtain.
Competition
The presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market.
Emerging markets
Emerging markets have a combination of the characteristics of free markets and command systems and are in the process of creating opportunities to become a developed nation.
Specialization
The use of the resources of an individual, a firm, a region or a nation to concentrate production on one or a small number of goods and services.
Division of labor
The separation of the work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers.
Money
Any item that is generally acceptable to sellers in exchange for goods and services.
Consumer sovereignty
Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumers’ direction of production through their rand votes.
Rand votes
The ‘votes’ that consumers and entrepreneurs cast for the production of consumers and capital goods, respectively, when they purchase those goods in product and resource markets.
