Microeconomics How Competitive Markets Work Flashcards
Chapter 2
Resource allocation
the way in which a society’s productive assets are used amongst their alternative uses
Market economy
market forces are allowed to guide the allocation of resources within a society
Centrally planned economy
decisions on resource allocation are guided by the state
Mixed economy
resources are allocated partly through price signals and partly on the basis of direction by government
Capitalism
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
Invisible hand
term used by Adam Smith to describe the way in which resources are allocated in a market economy