Capitalism vs. Socialism: Key Concepts and Insights

These flashcards cover key vocabulary related to the concepts of capitalism and socialism, focusing on their characteristics, implications, and economic principles.

Capitalism

An economic system characterized by private ownership of resources and the use of a market price system for the allocation of goods and services.

Socialism

An economic system where the government owns and controls the means of production and distribution of goods.

Market Price System

A system where prices for goods and services are determined by the forces of supply and demand.

Incentives

Rewards or penalties that motivate individuals to take certain actions in an economic context.

Trade and Specialization

The practice of focusing on what one does best and exchanging goods and services with others to improve efficiency and productivity.

Profit and Loss System

A system that allocates resources according to profits made or losses incurred by businesses, directing them toward efficient use of resources.

Scarcity

A situation in which resources are limited in relation to the wants of individuals or society.

Innovation

The process of developing new ideas, products, or methods which enhance efficiency and production within an economy.

Freedom of Ownership

The right of individuals to own property and the fruits of their labor, which encourages investment and economic growth.

Shortages and Surpluses

Shortages occur when demand exceeds supply, while surpluses occur when supply exceeds demand; markets adjust prices to eliminate these discrepancies.

Central Planning

An economic approach where the government makes all decisions about the production and distribution of goods, often leading to inefficiencies.

Clever Response

A concise answer to the question of why capitalism succeeds and socialism fails, emphasizing the role of the market price system.

Venezuela

An example of a socialist economy where government price controls led to economic crises, shortages, and a decline in the standard of living.

Mussolini's Claim

The assertion that in a complex economy, more freedom cannot be allowed, highlighting the need for government control, which contrasts with market-based solutions.

Adam Smith

An economist known for his work 'The Wealth of Nations', which explores the productivity of people and the benefits of capitalism.

North Korea

An example of a failed socialist state characterized by government control over all economic decisions, leading to poverty and oppression.

Demand and Supply

Economic forces that determine the price and quantity of goods and services in a market, balancing each other through price adjustments.

Decentralized Economy

An economic system where decisions on production and distribution are made by numerous individual participants rather than a central authority.

Economic Efficiency

A state in which resources are allocated in a way that maximizes the production of goods and services, minimizing waste.