Microeconomics How Competitive Markets Work Flashcards

Chapter 2

1
Q

Resource allocation

A

the way in which a society’s productive assets are used amongst their alternative uses

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2
Q

Market economy

A

market forces are allowed to guide the allocation of resources within a society

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3
Q

Centrally planned economy

A

decisions on resource allocation are guided by the state

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4
Q

Mixed economy

A

resources are allocated partly through price signals and partly on the basis of direction by government

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5
Q

Capitalism

A

a system of production in which there is private ownership of productive resources, and individuals are free to pursue their objectives with minimal interference from government

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6
Q

Invisible hand

A

term used by Adam Smith to describe the way in which resources are allocated in a market economy

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