| Term | Definition |
|---|
| Economic system | the way in which a nation uses its resources to satisfy its peoples wants and needs |
| The first of four basic questions every economic system has to answer-- | What is going to be produced-- and how much of it? |
| The second of four basic questions every economic system has to answer-- | Who is going to produce it? |
| The third of the four basic questions every economic system has to answer-- | How should it be produced? |
| The fourth of the four basic questions every economic system has to answer-- | Who gets it, once it has been produced? |
| Traditional economic system-- | answers all four of the basic questions with one answer--"the way we've always done it in the past." |
| Another name for a Command Economy | a Controlled Economy |
| Other names for Command economies-- | Controlled economies, socialist economies, communist economies, "state" economies |
| the basic idea of Command economies-- | that the answer to all 4 of the basic questions is "the government decides" |
| Another name for a Market Economic system | a Capitalist economy |
| Other names for Market economies | Free market economies, Free enterprise systems, Capitalist economies, or just simply "the market" |
| The basic idea of Market economies-- | that the answer to all four of the basic questions is "different individuals"-- individual sellers, individual buyers, individual businesses, individual workers or owners |
| Most "real world" economies-- | are "mixed economies"-- largely a mix of market and command economy-- the real question is "how much of these 2 (or 3) in the mix?" |
| Adam Smith | economist, author of "The Wealth of Nations (1776)," founder of modern economics |
| basic economic ideas of Adam Smith | economic freedom, individual self-interest, government "laissez-faire," and the "invisible hand" |
| "laissez-faire" | French term for "leave it alone" or "let it be"-- the idea that the economy as a whole, and most individuals, will be much better off if the government doesn't interfere in the economy |
| "invisible hand" | Adam Smith's idea that every person, looking after themselves first, will have the overall effect of producing the best and most efficient economic result for the whole society |
| Main features of a Market Economy | 1) little government control 2) freedom of enterprise |
| Main features of a Market Economy | 3) freedom of choice 4) private property |
| Main features of a Market Economy | 5) profit incentive 6) competition |
| Freedom of enterprise | freedom to start up one's own business-- also, freedom to fail at that business |
| Freedom of choice | consumer's freedom to spend one's money as one chooses-- also, worker's freedom to take or leave jobs |
| Profit | money left over after all the costs of production |
| profit incentive | the desire to make a profit |
| private property | owning one's own home, business, personal property, money |
| competition | freedom to attempt to do or produce what others are-- better, cheaper, more attractively |
| Economic efficiency | the wise use of resources so that people get more of what they want and need over time |
| Economic growth | the expansion of the economy, producing more goods, jobs, wealth |
| Economic security | protection against poverty and its causes-- job loss, disability through age or medical condition |
| Equity | the ability of a social or economic system to treat people fairly and justly |
| Standard of Living | the overall material well-being of a person, group, or nation |
Combine with other sets
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