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ISS1120 – The Social Environment chapter 16 power point

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The Nature of an Economy
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-Social organization of society which produces/distributes economic goods. Modern economies are complex. -Four functions of economy. Determine kinds of goods to be produced. Determine amount of each good to be produced. Determine resources allocated to a good’s output. Determine ultimate division of goods.
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The Great Economic Problem Facing Modern Societies
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How can scarce resources satisfy as fully as possible the ever-expanding wants of all members of a society? Economizing. Allocating.
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Evolution of Economic Systems.
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-Feudalism(some free workers/traders) -Mercantilist system(government controlled) -Market economy (laissez faire capitalism) -Pragmatic market economy (modern).
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Influence of Socialism
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-Socialism developed in mid-1800s in reaction to problems caused by non-regulated market economy. Utopian socialists promoted peaceful change. radicals such as Marx & Engels proposed revolt against organized social structure.
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Defining Socialism
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-Soviet-style socialism: government makes decisions about allocation/distribution of goods. -Communism: a type of Soviet-style socialism. Communist Party plays key role. Includes key political beliefs from communist writers. Sees capitalism as doomed. -Socialistic government: government owns means of production, promotes income equalization. Many forms of socialism.
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Planned and Unplanned Economies.
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-Unplanned economies rely on markets to control economic decisions United States. Western Europe. -Planned economies rely on government. Former Soviet Union. China.
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How Does a Market Economy Work?
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Market economy is an economic system relying on the initiative of private citizens for production of economic goods. -No production quotas by government. -Prices/profits not set by government. -Chief incentive is profit. -In practice, government regulates to some degree, provide legal framework.
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Modern Economies are Pragmatic Market Economies.
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-Few differences between modern planned and unplanned market economies. -Pragmatic market economies. Use markets as a central way of allocating resources. Regulate and control those markets. Change market outcomes to varying degrees.
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Modern Differences?
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All modern economies are pragmatic market economies. -Government involvement to some degree. -Pragmatism is driving force. Differ only by institutional/historical settings. Affects how government interacts with market.–In China, citizens expect government to step in. —In United States, reliance on “rule of law” to limit government.
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Invisible hand
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Adam Smith’s term for the market forces of free competition.
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Feudalism
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System in which tradition ruled, and most people were peasants tied to the land and their lord.
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Economic wants
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Desires for things that can be obtained by labor or through exchange.
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Planned economy
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Relies primarily on a government-controlled production and distribution system.
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Equilibrium price
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Price at which demand exactly equals supply.
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Economics
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The study of the social organization through which people satisfy their wants for scarce goods, including services..
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Communism
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Autocratic or state socialism in which a central party determines society’s goals.
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Unplanned economy
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Relies primarily on the market to control economic decisions.
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Mixed economy
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Economy in which both the market and government determine how goods are produced and distributed.
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Macroeconomics
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Focuses on the study of the aggregate economy, the economy as a whole.
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Mercantilist system
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System that increased the power and monetary wealth of nations.
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Factors of production
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Human and non-human resources used to produce material goods.
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Market demand
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Amount of a product that people are willing to buy at a given price and time.
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Economizing
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Making the best use of the resources employed.
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Free enterprise economy
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Economy in which government plays no part at all.
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Globalization
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The integration of world economies.
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Capital
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Productive equipment which includes tools, machines, factory buildings, etc.
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Socialism
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Economic system under which society as a whole takes the primary responsibility for producing and distributing economic goods.
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Natural resources
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Land, raw materials, water, etc., that are the basis of all the material products that humans make.
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Demand curve
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Shows the amount of a product buyers would be willing to purchase at different prices at a given point in time.
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Labor
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Efforts of human beings.
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Supply curve
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Shows the amount of a product sellers would be willing to offer at different prices at a given point in time.
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Microeconomics
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Focuses on the economic decisions facing individuals.
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Outsourcing
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Shifting of jobs from the U.S. to lower-wage developing countries.
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Soviet-style socialism
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Economic system in which the government makes decisions about the allocation and distribution and goods.
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Economy
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Social organization by means of which the people of a given society produce and distribute economic goods.
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Economic goods
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Things that money can buy and that are the objects of our economic wants.
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Market economy
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System that relies on the initiative of private citizens for the production of economic goods.
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Capitalism
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Economic system based on private property, markets, entrepreneurial initiative, and the ownership of the means of production by the private sector of the economy.
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Wealth
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Material economic goods.
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Laissez-faire
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Allowing the market to operate with minimum government regulation.