ECONOMIC INSTUTIONS

Economic Institutions

➔ Functionalist Perspective

◆ Economic institutions - vital components of society \n ◆ Essential for survival \n

Economic Institutions

➔ Conflict Perspective

◆ Emerged to benefit the ruling class \n ◆ Capitalists - Proletariats

Reciprocity

A form of gift exchange between two parties wherein return is expected after product or gift giving.

Transfer Payments

Are payments that are made without any good service being recieved in return.

Redistribution

The act of the Government to distribute income from the wealth businesses to the less wealthy.

Market System \n

➔ Allows the free flow of goods \n between and among private \n individuals and firms \n ➔ Private property \n ➔ Freedom of enterprise and \n choice \n ➔ Self-interest \n ➔ Competition \n ➔ Markets and prices \n ➔ Reliance on technology a \n capital goods \n ➔ Specialization \n ➔ Use of money \n ➔ Limited government

Invisible Hand

➔ Self-interest and competition

Producers

maximizing gains and production

Consumers

highest satisfaction

Market

mechanism which brings buyers and sellers together \n for a desired transaction

Prices

signaling device to indicate the value of a good or service

Specialization

➔ Division of labor \n ➔ Efficiency \n ➔ Taking advantage of the differences \n ➔ Concentrates on a single task

Use of Money

➔ Easier exchange between transacting parties \n ➔ From barter

Encourages an Active But Limited \n Government

➔ Market system –efficiency \n ➔ Government – welfare of all the segments of the economy

Free Market Economy

➔ The price of a good or service is determined by the forces of supply and demand

Free Market Economy

Competitiveness \n Equilibrium price

State

plays an important role in the market and regulate prices \n

Keynesian theory

advocated for a reduction of interest rates

Labor

producer good