Unit 2 Flashcards
means by which societies or governments organize and distribute available resources, services, and goods across a geographic region or country.
ECONOMIC SYSTEM
Economic systems regulate the?
factors of production:
including land, capital, labor, and physical resources.
encompasses many institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.
ECONOMIC SYSTEM
TYPES OF ECONOMIC SYSTEMS
- Traditional economic system
- Command economic system
- Market economic system
- Mixed system
They use barter instead of money.
- TRADITIONAL ECONOMIC SYSTEM
is a system that relies on customs, history, and time-honored beliefs.
- TRADITIONAL ECONOMIC SYSTEM
Societies with traditional economies depend on?
agriculture, fishing, hunting, gathering, or some combination of them.
there is a dominant centralized authority that controls a significant portion of the economic structure and government makes all economic decisions.
- COMMAND ECONOMIC SYSTEM
also known as _______________ the command economic system is common in communist societies since production decisions are the preserve of the government
planned system
Advantages of Command Economic Systems
- If executed correctly, the government can mobilize resources on a massive scale. This mobility can provide jobs for almost all of the citizens.
- The government can focus on the good of the society rather an individual. This focus could lead to a more efficient use of resources.
Disadvantages of Command Economic Systems
- It is hard for the central planners to provide for everyone’s needs. This forces the government to ration because it cannot calculate demand since it sets prices.
- There is a lack of innovation since there is no need to take any risk. Workers are also forced to pursue jobs the government deems fit.
these are based on the concept of free markets. In other words, there is very little government interference.
- MARKET ECONOMIC SYSTEM
There is no government intervention in a pure market economy which is also known as?
(“laissez-faire”)
Advantages of a Free Market Economy
- Consumers pay the highest price they want to, and businesses only produce profitable goods and services. There is a lot of incentive for entrepreneurship. This leads to the most efficient use of the factors of production since businesses are very competitive.
- Businesses invest heavily in research and development. There is an incentive for constant innovation as companies compete to provide better products for consumers.
Disadvantages of a Free Market Economy
- Due to the fiercely competitive nature of a free market, businesses will not care for the disadvantaged like the elderly, disabled, and those who lack skills. This leads to higher income inequality.
- Since the market is driven solely by self-interest, economic needs have a priority over social and human needs like providing healthcare for the poor. Consumers can also be exploited by monopolies.
a combination of different types of economic systems. This economic system is a cross between a market economy and command economy.
- MIXED SYSTEM
In the most common types of mixed economies, the market is more or less free of ___________ ownership except for a few key areas like transportation or sensitive industries like defense and railroad.
government
Advantages of Mixed Economies
- There is less government intervention than a command economy. This means that private businesses can run more efficiently and cut costs down than a government entity might.
- The government can intervene to correct market failures.
- Governments can create safety net programs like healthcare or social security.
- In a mixed economy, governments can use taxation policies to redistribute income and reduce inequality, as well as provide for public goods like roads, community centers, and schools.
Disadvantages of Mixed Economies
- There are criticisms from both sides arguing that sometimes there is too much government intervention and sometimes there isn’t enough.
- A common problem is that the state run industries are often subsidized by the government and run into large debts because they are uncompetitive.
occurs whenever quantity demanded is greater than quantity supplied at the market price.
shortage
More people are willing and able to buy the good at the current market price than what is currently available.
shortage
When a shortage exists, the market is not in _________
equilibrium.
At equilibrium, the quantity demanded _____ the quantity supplied at the market price
equals
CAUSES OF SHORTAGES
- Increase in demand
- Decrease in supply
- Government intervention
It means that the demand for a good or service is greater than the availability of the good or service.
Scarcity
Scarcity is important for understanding how goods and services are ________
valued.
The commodities may be divided into two the
Goods and Services.
The act of making goods and services
Production
Act of using the goods and services to satisfy human wants
Consumption
the theory of exponential population and arithmetic food supply growth.
The Malthusian Theory of Population
The Malthusian Theory of Population was proposed by
Thomas Robert Malthus
He believed that a balance between population growth and food supply can be established through preventive and positive checks.
Thomas Robert Malthus
MAJOR ELEMENTS OF THE MALTHUSIAN THEORY
- Population and Food Supply
- Checks on Population
- Positive Checks
- Preventive Checks
Food supply increases at a slower rate than the population. That is, the food supply will be limited in a few years. The shortage of food supply indicates an increasing population.
- Population and Food Supply
o When the increasing population rate is greater than the food supply, __________ exists.
disequilibrium
o When the increasing population rate is greater than the food supply, disequilibrium exists. As a result, people will not get enough food even for survival. People will die due to lack of food supply.
- Checks on Population
o Nature has its own ways of keeping a check on the increasing population. It brings the population level to the level of the available food supply.
- Positive Checks
The positive checks include?
famines, earthquakes, flood, epidemics, wars, etc.
o The preventive measures such as late marriage, self-control, simple living, help to balance the population growth and food supply.
- Preventive Checks
