Economic Systems -Optimal Decision – Flashcards
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Market
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Made up of all producers who make and sell particular goods and people that want to buy it
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What does it mean to be "In the market" for something?
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It means you want a specific good
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Traditional Economy
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An economic system that relies on habit, custom, or ritual to decide the 3 Q's
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What could destroy a Traditional Economy?
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Natural Disasters
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Traditional Economies are usually big. True or False
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False
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Capitalism is also called
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Free Market Economy
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Who answers the 3 Q's in Capitalism?
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The people
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Specialization
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Focusing on one job
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What does the Freedom of Enterprise say?
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It ensures that entrepreneurs are free to obtain and use resources to produce and sell their choice of goods
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What are 3 Important characteristics of Capitalism?
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Competition, Specialization, and Self regulation
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Why is competition between businesses good for us?
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Lowers prices
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Command Economy is also known as
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Communism
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Who answers the 3 Q's?
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The Government
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Why is communism bad?
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No competition, less efficiency, and less equity
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What is one positive thing about communism?
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Job security
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What is another name for Mixed Economy?
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Socialism
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Who answers the 3 Q's in socialism?
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The people and the government
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Wealth is distributed in Socialism. True or False.
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True
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What did Hobbes write about?
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Government formation
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What did Hobbes believe?
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Everyone acted in their own interest and acted rationally
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Father of Capitalism
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Adam Smith
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What did Adam Smith write?
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Wealth of Nations
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What is Wealth of Nations about?
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What needs to happen for Free Markets to work
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What theory is Adam Smith known for?
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The Invisible Hand
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What did Ricardo want?
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Countries to specialize and trade with each other
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What did Keynes do?
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Temporarily fixed the economy during The Great Depression
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What did Keynes say the government should do?
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Spend money they don't have
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Hayek said there should be little/a lot government intervention
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little
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During Reagan's presidency, Friedman helped the economy by
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Lowering taxes and spending less with little government intervention
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When you keep buying something, the ______ goes down. (DMU)
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Marginal Benefit
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Optimal Decision is when
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The Marginal Cost meets the Marginal Benefit
