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Economics: Chapter 2
intro to economic systems
Terms in this set (36)
the way a society uses resources to satisfy its peoples wants
an economic system in which people produce and distribute goods according to customs handed down from generation to generation
Name the 3 types of economies and give examples.
1) traditional economy
-ex.: Kavango people in southern africa
2) command economy
-ex.: North Korea
3) market economy
-ex.: Unites States
an economic system in which the government makes all economic decisions
an economic system in which individual choice and voluntary exchange direct economic decisions
List the advantages and disadvantages of a traditional economy.
~ little disagreements
~ ensures survival
~ it resists change
~ less productive
the rights of individuals and groups to own businesses and resources
private property rights
any place where people buy and sell goods and services
the principle that the government should not interfere in the marketplace
an economic system that is based on private ownership of the factors of production
a trade in which both traders believe that what they are getting is worth more than what they are giving up
a financial gain that a seller makes from a business transaction
involves all the actions sellers, acting independently, do to get buyers to purchase their products
the idea that consumers have the ultimate control over what is produced bc they are free to buy what they want and to reject what they don't want
a situation in which people concentrate their efforts in the activities that they do best
the market where goods and services are bought and sold
the market for the factors of production (land, labor, capital, entrepreneurship)
List the advantages and disadvantages of a market economy.
~ more freedom to create new products
~ more profit motive
~ individuals free to make economic choices
~ can't provide security
~ problems due to lack of government
a system in which central government officials make all economic decisions
centrally planned economy
an economic system which the government owns some or all of the factors of production
an economic system in which the government owns all the factors of production and there is little or no political freedom
systems require absolute obedience to those in power
an economy that has elements of traditional, command, and market systems
means to change from private ownership to government or public ownership
means to change from government or public ownership to private ownership
refers to all the economic interactions that cross international boundaries
Describe a mixed economy.
- has elements of market + planned economies
- most common type of economic system
Why are some countries called a "mixed economy"?
most are considered mixed because most have some portion of the factors of production under government control
a tool that economists use to understand how market economies operate
circular flow model
What are the two main focuses on a circular flow model?
businesses and households
What is the difference in socialism and communism?
communism does NOT have private ownership and socialism does.
What is the goal of a traditional economy?
What economy is run by consumers and producers?
What has greatly effected the traditional economy?
What is the most common type of economy?
True or False: Market economy has 4 fundamentals.
False; It has 5.
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