Macroeconomics ECN2300

9 terms by florenzaphung 

Create a new folder

Advertisement Upgrade to remove ads

In a market system scarce goods are allocated through the operation of...

Market prices that are determined by consumers and producers acting in their own self-interest. Participants act in their own self-interest and seek to maximize satisfaction or profit through their own decisions regarding consumption or production. Goods and services are produced and resources are supplied by whoever is willing to do so. The result is competition and widely dispersed economic power.

Characteristics of the Market System

Private property
Freedom of enterprise and choice
Self-Interest
Competition
Market & Prices

Characteristics of a Command System

Known as socialism or communism
government ownership
Decisions made by a central planning board.

In a command economy scarce goods are allocated by...

a government-appointed planning board based on the board's long-term priorities.The command economy is characterized by public ownership of nearly all property resources, and economic decisions are made through central planning. The planning board, appointed by the government, determines production goals for each enterprise. The division of output between capital and consumer goods is centrally decided based on the board's long-term priorities

"Division of Labor"

Specialize in tasks that take advantage of their individual abilities and skills.

Specialization

When resources are specialized, exchange is necessary to obtain the goods and services one needs.

Why does the market system causes the economy to conserve most in the use of resources that are particularly scarce in supply.

Increasing scarcity of a resource causes its price to rise. Firms ignoring higher resource prices will become high-cost producers. Firms switching to the less expensive inputs become lower-cost producers and earn higher profits than high-cost producers. The market system, therefore, forces producers to conserve on the use of highly scarce resources.

What are the five fundamental questions?

1.What does the economy produce? Whatever people are willing to buy.
2.How does the economy produce it? The most efficient/cheapest way.
3.Who gets the goods? Whoever wants it and can afford it.
4.How do we promote change? Through self-interested innovators and inventors.
5.How do we promote progress? Through self-interested entrepreneurs and politicians.

Determinants of Demand

Income, price of related goods, taste and preferences, number of consumers, expectations

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set