Economic Systems II: Capitalism

These flashcards cover key concepts related to capitalism, including private ownership, decision making, market prices, and the efficiency of resource allocation.

Capitalism

An economic system where capital and non-capital assets are privately owned.

Private Ownership

The hallmark of capitalism, referring to the ownership of both capital and non-capital assets by individuals rather than the state.

Decentralized Decision Making

In capitalism, producers make their own decisions about production including quantity, timing, quality, and employment.

Market Prices

Prices that provide information on scarcity and serve as incentives for consumer behavior and production decisions.

Scarcity Indicator

Market prices indicate how scarce a good or service is; changes in price inform consumers and producers accordingly.

Reallocation of Resources

In response to changes in prices, resources are shifted towards producing goods that are becoming scarcer to meet demand.

Economic Efficiency

A condition in which resources are allocated in a manner that maximizes production without the need for central planning.