Economic Systems Flashcards
(17 cards)
Supply
The amount of a product or service available
Demand
The amount of a product or service that people want
Equilibrium
Where supply and demand meet
Supply and demand
If demand increases and supply stays the same/decreases prices go up, if demand decreases prices go down
Opportunity cost
The value of the next best alternative that you lose when you make a decision
Inflation
The general rise of prices over time (deflation is the inverse)
Gross domestic product (GDP)
The total value of all goods brought into a country in a specific time period, usually a year
Market economy
An economic system where business decisions are made by supply and demand
Components of the free market system
Private ownership of property and businesses, economic exchange, competition
Businesses in the free market
Compete against each other to satisfy customers and make profits
Competition leads to
Competitive pricing and higher quality goods
Traditionalism
Economic roles passed down through generations, very predicatible and stable but very little growth
Communism
Government makes all business decisions, no private property, goods and capital equally distributed, lack of personal freedom and little incentive to improve, also a fully marxist system has never been done before
Socialism
Government controls key industries such as healthcare but there is still some private ownership, reduces income inequality but also has high tax rates
Capitalism
A free market system where private ownership and competition are emphasized, leads to large economic growth, higher quality of life, global dominance, but income inequality
Factors affecting business profits
Revenue, tax, expenses,
