Economic Systems and Concepts

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A set of vocabulary flashcards covering key concepts in economic systems and principles.

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26 Terms

1
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What is profit?

The incentive manufacturers have to sell their products.

2
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What is competition?

The struggle among various producers for consumers' business.

3
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What are the three core economic questions?

What to produce?, For whom to produce?, How to produce?

4
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What characterizes a traditional economy?

Includes economic systems, market economy, factor payment, centrally planned economy, and safety nets.

5
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What is a centrally planned economy?

An economy where the government makes all economic decisions.

6
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What is a free market economy?

An economy where prices and production are determined by supply and demand with minimal government intervention.

7
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What defines a mixed economy?

An economy where resources and businesses are controlled by both private and government sectors.

8
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What is opportunity cost?

The most desirable alternative given up in any choice or decision.

9
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What is economic security?

The goal met when the government provides programs to protect individuals facing unfavorable economic conditions.

10
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What limits economic growth?

Laws such as those that prohibit children under 18 from working.

11
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What does efficiency represent in economic terms?

The effective use of scarce resources to provide valued services.

12
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What is economic equity?

Assuring that wealth is fairly distributed.

13
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What results from specialization?

Increased productivity, lower costs, and greater efficiency.

14
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What are Adam Smith's 'invisible hand' factors?

Self-interest and competition.

15
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What is laissez faire?

An economic philosophy advocating minimal government intervention in the economy.

16
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What characterizes the U.S. economy?

It is best described as a mixed and free market economy.

17
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What is competition in economic terms?

The sale of state-run firms to privatized individuals who can compete in the marketplace.

18
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What is an economic transition?

The period of change when an economy shifts from centrally-planned to market-based systems.

19
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What is scarcity in economic terms?

The basic problem arising from limited resources and unlimited wants.

20
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What constitutes public goods?

Goods or services that the market cannot provide but benefit all of society.

21
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What is the private sector?

The part of the economy that includes transactions of private businesses.

22
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What does 'marginal' mean in economics?

Refers to the additional change resulting from one extra unit of good.

23
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What are sunk costs?

Costs that have already been paid and cannot be reclaimed.

24
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What role do negative externalities play?

They refer to unintended consequences that affect others, such as environmental harm.

25
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What is the purpose of a production possibilities curve?

To display the maximum possible output of two goods to show efficiency and scarcity.

26
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What happens when there is too much regulation?

It can lead to characteristics of a centrally planned economy, including poverty and insufficient supply of goods.