Lec 2 Flashcards
What is capitalism?
An economic system in which the major production and distribution is privately owned, operating under a market system.
What is Socialism?
An economic system characterized by public ownership of property and a planned economy.
What is a mixed economy?
A country that incorporates some elements of both capitalist and socialist economies.
What is the central virtue of markets?
That they allow individuals to organize productive activities in socially efficient ways using far less information than any other type of economic situtation.
What is efficiency?
Efficiency refers to the ability to achieve a desired outcome with the least amount of wasted resources, such as time, effort, or money. It is about maximizing productivity while minimizing costs and resource usage.
The economy works efficiently when it produces the right sort of stuff, delivers it in the right place at the right time, allowing individuals to satisfy their particular needs and desires.
What is pareto efficiency?
is a concept in economics that describes a state where resources are allocated in such a way that it is impossible to make any one individual better off without making at least one individual worse off.
When is competition good?
When it is able to generate beneficial side-effects.
Competition must be properly structured to be healthy and for the beneficial side-effects to outweigh negative effects.
What are negative externalities?
Negative externalities are costs incurred by third parties or society at large due to economic activities, where the parties responsible for these activities do not bear the full cost of their actions
What are public goods?
Goods that people consume together, and where one person’s consumption doesn’t limit another’s.
What are positive externalities?
A benefit enjoyed by a third party as a result of an economic transaction.
What justifies capitalism?
- A capitalist market economy is justified because it leads to good consequences, much better consequences than a rival economic system (planned economies)
- Produces higher economic growth which leads to more prosperity
- A market economy with a welfare state can make everyone better off, compared to other economic arrangements.
What is economic growth?
An increase in the quantity and quality of the economic goods and services that a society produces
What are some common measures of economic growth?
- Real Gross Domestic Product (GDP) per capita
- Real Income
What is the main way businesses serve society?
Businesses serve society by creating prosperity and opportunities. Business is a crucial driver of economic growth. Increases in economic growth allows people to realize the goals and desires they have for their lives.
What is Corporate Social Responsibility?
Is the concept that businesses have a duty to act in the best interests of their environment and society as a whole, beyond their obligations to shareholders and legal requirements. It involves companies integrating social, environmental, and ethical considerations into their business operations and interactions with stakeholders.
