epf unit 1

traditional economy

traditional economy

economic system in which the allocation of scarce resources, and other economic activity, is the result of ritual, habit, or custom.

economic systems

organized way a society provides for the wants and needs of its people.

command system

economic system characterized by a central authority that makes the major economic decisions.

socialism

economic system in which government owns some factors of production and has a role in determining what and how goods are produced.

market economy

economic system in which supply, demand, and the price system help people allocate resources; same as free enterprise economy.

market

meeting place (or arrangement) where buyers and sellers interact; this may be local, regional, national, or global.

capitalism

economic system in which private citizens own and use the factors of production in order to generate profits.

free enterprise

an economic system in which privately owned businesses have the freedom to operate for a profit with limited government intervention.

voluntary exchange

act of buyers and sellers freely and willingly engaging in market transactions; a characteristic of capitalism and free enterprise.

private property

fundamental feature of capitalism in that individuals own and control their possessions as they wish (houses, businesses, etc)

profit motive

driving force that encourages people and organizations to improve their material well-being; characteristic of capitalism and free enterprise.

competition

the struggle among sellers to attract consumers.

public property

property that is owned by the government (for the whole public/society), such as parks and city buildings in the USA

Adam Smith

the "big guy" in economics/ capitalism-- said greediness actually HELPS society (due to the Invisible Hand)

"the Invisible Hand"

the idea that there is a force (our greediness) that motivates to act in certain ways (our benefits!), but in so doing we serve others/ help society gets what it wants.

efficiency

One of the 5 main goals= (a) not wasting resources AND (b) making what we want with those resources.

ration

to allocate or distribute

the three questions for all society

WHAT/ HOW/ FOR WHOM to produce (goods & services)

Scarcity

unlimited wants exceed the limited resources available to fulfill those wants

microeconomics

the study of how households and firms make decisions and how they interact in markets

macroeconomics

The study of the economy as a whole

Karl Marx

founder of modern communism

factors of production

land, labor, capital, entrepreneurship

labor

Human effort directed toward producing goods and services

entrepreneurship

the process of starting, organizing, managing, and assuming the responsibility for a business

capital

money, machines, or tools used to produce goods and services

land

all natural resources used to produce goods and services

communism

a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.

Recession

A slowdown in a nation's economy

depression

A long-term economic state characterized by unemployment and low prices and low levels of trade and investment

PACED model

decision making method that involves identifying the problem, alternatives, criteria, evaluating and then deciding

trade off

Giving up one thing for another

opportunity cost

What is given up when a choice is made