Clark Econ - 2.1 and 2.2 Quizlet

Capitalism

An economic system where private individuals or businesses own resources and operate for profit with minimal government interference.

Free Market

A system where prices and production are determined by supply and demand without central regulation.

Invisible Hand

Adam Smith's concept that individuals' pursuit of self-interest naturally benefits society by meeting collective needs through market competition.

Laissez-Faire

An economic philosophy advocating minimal government involvement in the economy.

Law of Supply

The principle that higher prices lead to increased production and supply of goods.

Law of Demand

The principle that lower prices increase consumer purchasing, while higher prices reduce demand.

Equilibrium

The point where supply meets demand, resulting in stable prices and no shortages or surpluses.

Surplus

A situation where the quantity of goods supplied exceeds the quantity demanded, often leading to price reductions.

Shortage

A condition where demand exceeds supply, causing upward pressure on prices.

Mercantilism

An economic theory focused on accumulating wealth through trade restrictions, tariffs, and colonial resources.

Profit Motive

The driving force in capitalism where individuals or businesses aim to maximize financial gain.

Adam Smith

The 18th-century economist who laid the foundation for capitalism in his book The Wealth of Nations.

Venture Capitalists

Investors who fund new businesses in exchange for potential profits, promoting innovation and economic growth.