Chapter 2

Question 1

Economic systems

Answer 1

Particular set of institutional arrangements and a coordinating mechanism to respond to the problem of scarcity

Question 2

4 major role players in economic system

Answer 2

Households
Business enterprises
Government
Foreign sector

Question 3

Laissez-faire capitalism (pure capitalism)

Answer 3

Private ownership of resources
Government role limiter to:
- protecting private property
- establishing a legal environment where contracts are enforces, and people interact with markets

Question 4

Command system

Answer 4

Government owns most property resources and decisions set by a central economic plan made by the government

Question 5

Freedom of enterprise

Answer 5

Ensures that private businesses and entrepreneurs have the freedom to use economic resources to produce the goods and services of their choice to sell to their chosen markets

Question 6

Freedom of choice

Answer 6

Ensures that consumers/customers are free to purchase any goods and services of their choice that will best satisfy their utility, and that their budget allows.

Question 7

Invisible hand

Answer 7

Tendency of firms and resource suppliers that want to further their own self-interest in competitive markets to promote their interest to society

Question 8

Emerging markets

Answer 8

Depends on laissez-faire and government intervention, and are changing from low income countries to modern economies.