GMGT 1010 Understanding Capitalism - Class 2-3

Practice question-and-answer flashcards created from GMGT 1010 Class 2-3 lecture notes covering key concepts, definitions, assumptions, and comparisons of capitalism and socialism.

What is capitalism?

Capitalism is an economic system where private individuals and businesses own the means of production and operate for profit.

What are the three central features of capitalism?

The three central features of capitalism are wage labour, private ownership of the means of production, and production for exchange and profit.

What is private property?

Private property is the legal right to own and use economic goods like land and buildings.

Why should businesses and stores be privately owned while schools, hospitals, and parks are publicly owned?

Businesses and stores should be privately owned so private owners can compete and make profit. Schools, hospitals, and parks should be publicly owned because they are important services everyone needs access to.

What is individualism?

Individualism is the concept that the individual is more important than society or group when making decisions, individuals are naturally rational, and individuals seek to maximize their own self interest by making choices that benefit themselves.

How does individualism relate to capitalism?

Individualism gives individuals the freedom to own property, own businesses, compete, and follow their own self interest.

How does advertising impact rational decision making according to the notes?

Advertising harms individuals as rational decision makers because ads manipulate people into wanting products they do not really need.

What is economic freedom?

Economic freedom means having few restrictions on business activity, allowing individuals and businesses to enter business, enter contracts to exchange goods and services, and set prices freely.

What nine factors are used to measure economic freedom or identify restrictions on it?

1. Property rights, 2. Taxation, 3. How much government controls economy (government intervention), 4. Regulation (Rules), 5. International exchange, 6. Foreign investment, 7. Money and inflation, 8. Wage and price controls, 9. Corruption.

What is equality of opportunity?

Equality of opportunity is the assumption that all people have an even chance at responding to some condition in society.

What is the difference between equality of opportunity and equality of outcome?

Equality of opportunity means everyone starts with a fair chance to succeed, whereas equality of outcome means everyone finishes with the same results.

What is competition in the context of capitalism?

Competition occurs when many rival sellers seek to provide goods and services to many buyers.

Which industries are cited as having high versus low competition?

Fast food, tech, and food are cited as having high competition, whereas grocery stores are cited as having low competition.

What are the downsides of a competitive marketplace?

The downsides of a competitive marketplace are lower profit margins, price wars, and lower product quality.

What is profit?

Profit is the excess of revenues over expenses.

What are profit motive, profit maximization, and pressure for growth?

Profit motive is the desire to make profit; profit maximization is trying to make the highest profit possible; pressure for growth refers to businesses being pushed to grow and increase profits.

What is work ethic?

Work ethic is a set of moral values and principles that guide how someone approaches their job.

What is consumer sovereignty?

Consumer sovereignty is the assumption that consumers have and use their power over producers through the decisions they make in purchasing the goods and services provided by business.

What heavily advertised items are given as examples of manipulation in the context of consumer sovereignty?

Fast foods, Ozempic, Social media, sugar, and energy drinks.

What is the role of government in a perfect capitalist market?

In a perfect capitalist market, government involvement would basically be non-existent.

What is the main difference between capitalism and socialism?

In capitalism, the means of production are owned by private individuals, companies live by profit motive, and all have owners and managers. In socialism, money and other forms of capital are owned by the state/public, and everyone works for wealth which is distributed to everyone.