Types of Economic Systems

Vocabulary flashcards covering core terms, definitions, origins, and structural comparisons of economic systems including Capitalism, Socialism, Command Economies, and Communism.

The 3 Basic Economic Questions

The three fundamental decisions every economic system must make: 1. What goods and services should be produced? 2. How should these goods and services be produced? 3. Who consumes these goods and services?

Laissez-faire Capitalism

An economic system meaning "hands off the economy," characterized by zero government regulation over the economy and businesses, where factors of production are privately owned.

Factors of Production

The resources needed to produce goods and services, consisting of Land, Labor, and Capital (Money/Resources).

Entrepreneur

An individual who creates their own business and takes financial risks within a capitalist system.

Consumer Sovereignty

The power and freedom of consumers to determine what goods and services get produced through their choices.

Command Economy

An economic system in which the government owns the factors of production, answers the three economic questions, and maintains total regulation over the economy.

Mixed Economy

An economic system that combines features of Capitalism and a Command Economy, retaining some level of consumer sovereignty.

Socialist Economy (Socialism)

An economic system where the public, in the form of the state or community, controls the factors of production and makes decisions to protect workers and distribute goods according to need.

Communism

An economic and political system in which a community of workers controls the government, the government controls the economy, and society exists without class divisions.

Origin of Capitalism

Emerged in England out of the growth of that country's thriving, industrialized cloth industry.

Origin of Communism

First developed in Germany, where Marx and Engels criticized capitalism as it existed during the Industrial Revolution.