Economics: Concepts and Choices Chapter 2 Review

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economic system
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the way a society uses it scarce resources to satisfy its peoples unlimited wants
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traditional economy
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economic system in which families, clans or tribes make economic decisions based on customs and beliefs that have been handed down
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command economy
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an economic system when the gov. decides what good and services will be produced, how they will be produced and how they will be distributed
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market economy
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an economic system based on individual choice not gov. directives
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centrally planned economy
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system in which the society’s leaders, usually members of the central government, make all economic decisions
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socialism
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economic system in which all the government owns some or all factors of production
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communism
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more extreme form of socialism in which there is no private ownership of property and little or no political freedom
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authoritarian
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system that requires absolute obedience to authority
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private property rights
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rights of individuals and groups to own property
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market
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any place or situation in which people buy and sell resources and goods and services
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laissez faire
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principle that the government should not interfere in the market place
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capitalism
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economic system that is based on private ownership of the factors of production
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voluntary exchange
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a trade in which both traders believe that they’re getting is worth more than what they are giving
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profit
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financial gain a business transaction
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competition
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the effort of 2 or more people, acting independently, to get the business of others by offering the best deals
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consumer sovereignty
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idea that consumers have the ultimate control over what id produced because they’re free to but what they want and to reject what they don’t want
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specialization
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situation in which people concentrate their efforts in the activities that they do best
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circular flow model
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tool economists use to understand how market economies operate; visualizes all interactions and how they occur in a market
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product market
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market where goods and services are bought and sold
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factor market
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the market for the factors of production
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mixed economy
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an economy that has elements of traditional, command and market systems
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nationalize
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to change from private ownership to government or public ownership
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privatize
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to change from government or public ownership to private ownership
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global economy
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all the economic interactions that cross international borders
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How do command societies address the problem of scarcity?
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rule of law
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all people and institutions are subject to and accountable to law that is fairly applied and enforced
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Why are there no pure traditional economies?
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traditional economies are now inefficient and modernization and technology is forcing them to change
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Give 2 examples of intellectual property?
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writing a song and opening a business
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What are product markets? Factor markets?
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Product markets – market where goods and services are bought and sold Factor markets – the market for the factors of production
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How does traditional economy answer the 3 economic questions
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What: What has always been produced How: Traditions and customs For whom: Everyone
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Give an example of a traditional economic system feature in the US economy?
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Mom and Pop shops
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Name 3 disadvantages of command economy
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1. set classes 2. no political rights 3. central planners aren’t aware of the conditions which they are assigned so it is misguided
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Name 3 advantages of command economy
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1. produce what market can’t 2. no class system 3. economically productive are taken care of
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Name 3 disadvantages of market economy
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1. no military 2. no healthcare 3. lack of public goods
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Name 3 advantages of market economy
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1. economic freedom 2. free to develop interests and talents in work they find 3. political freedom
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Name 3 disadvantages of traditional economy
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1. no choice of job 2. outdated and inefficient 3. resist to change
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Name 3 advantages of traditional economy
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1. answers 3 economic questions 2. everyone is taken care of 3. everyone has a role
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3 examples of command economy in North Korea documentary
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What does Marx mean by class antagonisms? What does he urge them to do?
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He meant when classes fight against one another. He urges open hostility towards one another, take up arms and start work
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3 essential elements of market economies
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1. open markets 2. limited government involvement 3. consumer sovereignty

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