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Flashcards in Adobe Ch. 2 & 1.4 Deck (36)
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1

fundamental economic questions (3)

what to produce? how to produce? for whom to produce?

2

economic system definition

system of production and exchange of goods and services as well as allocation of resources in a society

3

two types of economic systems

command and market system

4

mixed economic system

combo of command and market system

5

command economy

economic system which decisions regarding producition and consumption are embodied in plan formulated by central authority - property resources (land/capital) are owned by the governement

6

examle of command economy

soviet union, cuba, north korea, china

7

market system - capitalism

private ownership of property resources (land, capital) ; using markets and prices to coordinate economic activityl market participants act in own self interests- goods.services produced, resources supplied by whoever is willing and able to do so; economic decision making is widely dispersed

8

pure capitalism is also known as

laissez faire

9

what is pure capitalism

gov role is limited to protecting priate property and establish enviornment appropriate to operation of market system; gov doesnt interefere with private transactions- this doesnt exist today

10

mixed economics

today's common economies; g/s allocated by cobo of free markets, regulation and other forms of collective control; market is dominant force in deciding what, how, whom

11

characteristics of a market system

private property rights, freedom of enterprise and choice, competition, market and prices, specialization, active but limited ov, self interest

12

private property rights

private indiv. and frims own most of property resources )land and capital); indiviiduals acquire control, dispose of property resources as they see fits, only mutually agreeable economic transactions can take place, encourage economic transactions can take place, encourage maintanece of property, extends to copyright, trademark, patents

13

freedom of enterprise and choice

freedom of enterprise- entreprenuers and businesses have freedom to obtain goods and resources, produce groods of choice, sell goods in markets of choice
fredom of choice- owners of resources can use resources as they see fit

14

self interest

each economic unit strives to acheive its own particular goal which usually requirese delivering something of value to others; entreprenuers try to max profits; motiviation of self interest gives direction to chaos

15

price signals

society decides what economy should porudce, how production be efficiently organized and how goods/services to be shared

16

profits and losses equals

total revenue minus total cost to produce, including the OC

17

sovreign definition

in command

18

resource market

quantity of resources supplied and money of resources in resource market

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what counts as resource prices

wages for labor, rents for land, interest for capital etc

20

invisible hand

self interest causes uninteded rise in social interest

21

caveat is

warning

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resource market does what

households sell, businesses buy

23

product market does what

businesses sell, households buy

24

market economy creates what

continous repetitive flow of goods/services, resources and money within system

25

labor is

wage

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land is

rent

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capital is

interest

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entreprenuership is

profit

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revenue net of cost

firm's profit, leftover money from after buying resources in resource market

30

sole propietorship

business has single owner responsible for making decisions