Chapter 1: Economic Systems Flashcards
(28 cards)
What are the factors of production
Entrepreneurship
Labour
Land
Capital
Economic system definition
How the factors of production are organized to produce goods and services.
What are three economic issues?
WHAT is being produced
HOW is production taking place(quality and by whom)
FOR WHOM are they being produced
What are the three basic economic systems
Planned economic
Mixed market
Free market
What is being produced in all 3 market systems
Planned: what government approves
Free:all required items
Mixed: consumer willing to pay and government important
How is production taking place in all 3 market systems
Planned:no freedom of choice
Free:competing businesses
Mixed:public and private sector
For whom is it being produced in all 3 market systems
Planned: government decision
Free:those who can afford it
Mixed:government and consumer needs considered.
Differences between free market and planned economy
Owned by private-owned by government
Freedom to start business-government regulation
Supply and demand-price control
Communist countries/planned economic countries
North Korea
Cuba
Socialist leaning countries
China, Venezuela.
Mixed economic countries
France, Sweden
Capitalist leaning countries
U.S, japan
What are the advantages of a planned economic system
- In theory no unemployment(all citizens employed by government)
- All citizens have access to essential services
What are the disadvantages of a planned economic system
- Consumers needs very low regarding provision of services.
- Limited choice of products (government regulated)
- Little reason to work hard
- price controlled by government
What are the advantages of a free market/capitalism system
- Hard work=success
- Entrepreneurship, competition= better price and quality.
- Variety of products/services
- Resources privately owned and used effectively(recycled and reused)
What are the disadvantages of a free market/capitalism system
- Unfair distribution of wealth
- Monopolies, limited competition and higher price lower quality
- Little money/motivation to provide public services
- Price controlled by government
- Competition, bankruptcy and job losses
What are the advantages of a mixed market system
- Social services provided by government
- Work opportunities created by government
- Combination of advantages from other markets depending on government interference
What are the disadvantages of a mixed market system
- Public sector=bureaucratic delayed responses and decisions, poor services
- Combined disadvantages
What is globilisation and reasons for it.
International trade, better transport and communication
What happens with globalisation/what is present
Competition between businesses and countries Money flow between countries International travel Exchange rates Freedom to work in another country Governments subsidizing production More choices for consumer
What shows the economic state of a country
Infant mortality levels Literacy rate Poverty Political+economic stability Democracy Standard of living Infrastructure
What are the advantages of globalisation
Capital moves freely
Competition increases variety
Freedom of movement for labour
Why does international trade benefit fist world countries?
Manufacturing is easier because more capital and skills are available
Unemployment is low
Stronger exchange rates
Governments can afford to subsidize industries
Why is the market system also called the free market system
It has the freedom of choice guided by businesses and consumers which influences the supply and demand of industrial/consumer goods as required. The government tries not to interfere, the market forces regulate the economy.
