Ch. 2 Econ Flashcards
(36 cards)
What is the market system also called?
Free enterprise or capitalist
What are the four types of economic systems?
Traditional
Command
Market
Socialist
Who is considered the founder of the market system?
Adam Smith
What book did Adam Smith write? And when was it published?
The Wealth of Nations 1776
Who are the main people that answer the 3 basic economic questions in a market system
Buyers and sellers
Who has all the power in a market system
Consumers
Dollar votes
The votes that consumers and entrepreneurs cast for the production of consumer and capital goods when they purchase them in product and resource markets
Creative destruction
When new technology destroyed old technology
Consumer sovereignty
The idea that consumers will ultimately dictate what will be produced by choosing what they purchase or do not purchase
Self interest and rational choice theory
Always do things to benefit yourself
Invisible hand
The belief that the best interests of society will be met when people compete to achieve individual self interest
4 components a market system must have to operate efficiently
Freedom of exchange
Private property
Competition
Profit motive
Freedom of exchange
Freedom to buy and sell whatever you want to
Do all economic systems have private property?
No, command economy
How does private property affect people in a market economy?
You want what someone else has
Profit
The money you have left over after paying expenses
Double taxation?
Pay taxes when you receive income and then when you divide the money among the individual owners of stock corporation and individual owners pay taxes
Unlimited Liability?
Money that you owe and your whole business can be lost or anything in the owners name
Who is the founder of the command system
Marx
What book did Marx write
Das Communist Manifesto
Disposable income
total personal income minus personal current taxes
Discretionary income
after-tax income), minus all payments that are necessary to meet current bills.
What is an example of discretionary income?
Money left over for vacations after all bills are paid
What types of liability does a silent partner have?
Limited
