Chapter 2 Flashcards
(28 cards)
Government makes decisions
Command System
A particular set of institutional arrangements and a coordinating mechanism
Economic system
Characterized by the private ownership of resources
Market System
Based on customs or beliefs
Tradition system
Enables individuals and businesses to obtain, use and dispose of property resources
Private property
Ensures businesses are free to use economic resources
Freedom of enterprise
Enables owners to employ or dispose of their property and money as they see fit
Freedom of choice
Motivating force of the various economic units as they express their free choices
Self interest
diffuses economic power within the businesses
Competition
An institution or mechanism that brings buyers and sellers and contact
Market
Founder of economics
Adam Smith
What is the real wealth of a nation
It is not gold silver or jams it is the ability of people to produce goods and services
What are the three virtues of a market system
Freedom efficiency incentives
Use of resources of an individual ordination to produce a few good rather then the entire range
Specialization
Contributes to society’s output
Division of labor
Makes trade easier
Medium of exchange
Swapping goods for goods
Batter
Helps facilitate exchanges of goods and services
Money
Types and quantities of goods produced
Consumer sovereignty
The votes that consumers cast for the production of consumer and capital goods
Dollar votes
Tendency of firms and resource suppliers that seek to further their own self interest in competitive markets
Invisible hand
The place where resources or services of resource suppliers are bought and sold
Resource
Place where goods and services produced by businesses are bought and sold
Product market
Accumulation of capital goods
Investment
