Chapter 2 Economics Test Questions – Flashcards
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Economic System
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An organized way for a country to provide for the wants and needs of their people
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Traditional Economy
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Allocation of scarce resources and nearly all the other economic activity comes from habits, rituals, or customs -roles defined by generations before you
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Traditional advantages
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-know your role
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Traditional disadvantages
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-discourages new ideas -lack of progress -lower standard of living
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Command economic system
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System where there is a central authority that makes most of the decisions for the people regarding the three basic questions -people have very little say -all decisions made by a board
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Command Advantages
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-change quickly (move/change resources) -health care/public services are taken care of at little to no cost
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Command Disadvantages
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-wants of consumers aren't always met(needs are taken care of) -little intensive to work hard (same job =same pay) -large decision making process (a lot to the process (red tape)) -not flexible with small day to day problems -no intensive to be innovative
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Market economy
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System where people and businesses act in their own self interest to answer the three basic economic questions -people's money are votes
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Market advantages
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-can gradually adjust to change -high degree of freedom of decisions -small amount of government interference -decision making is decentralized (people make there own decisions every day) -provides a variety of goods and services -high degree of consumer satisfaction
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Market disadvantages
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-doesn't provide everyone's needs -doesn't provide enough public services -high degree of uncertainty for individuals and businesses
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The market system can fail if the following aren't met:
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1)market must be competitive 2)resources must be free to move (go job to job) 3)consumers need enough information to make good decision
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Mixed economy
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A combination of 2 or more economic systems
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Capitalism
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-Form of a market economy -system where private citizens, many whom are entrepreneurs, own factors of production -also called the free enterprise system
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Capitalism characteristics
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-economic freedom -voluntary exchange -private property -profit motive -competition
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Economic freedom
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Spend/buy/ and stuff how you want
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Voluntary exchange
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Trade/swap stuff in your own free will
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Private property
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The right to own your own stuff
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Profit motive
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Desire to make your own money
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Competition
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Rivalries/battle for sales/profit
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Economic and social goals
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-goals are important because they provide a benchmark to see if a system meets its society's needs -all systems have social and economic goals but they will differ from system to system
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7 economic goals
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1)economic freedom 2)economic efficiency 3)economic equality 4)economic security 5)full employment 6)price stability 7)economic growth
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Economic freedom
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People can make their own decisions
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Economic efficiency
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Resources are used and not wasted
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Economic equality
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Things are fair and imperial
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Economic security
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Protection from negative events (social security)
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Full employment
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Providing as many jobs as possible
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Price stability
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Trying to keep costs relatively stable
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Economic growth
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Increase in productivity to improve standard of living
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Role of entrepreneurs
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-organize and manage the factors of production in search of making money **most important people in economy** -start new businesses up-act as their own boss -many fail at their ventures but continue to create new things and companies -they attract other firms (similar) to the industry (competition)
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Role of consumer
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Individuals that buy and use goods and services for personal or business matters
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Consumer sovereignty
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Ruler of the market -they hold power -dollar vote
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Role of government
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-protector -provider and consumer -regulator -promoter of national goals
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Protector
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Enforces laws and contracts so everyone is on the same level "Follow the rules of the game"
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Provider and consumer
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Buys stuff and makes sure citizens have certain public services
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Regulator
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Preserves and ensures competition in market place
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Promoter of national goals
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Which objects and aims will we focus on
