Economic Systems Lecture Vocabulary

Vocabulary flashcards covering key terms and thinkers related to traditional, market, planned/command, and mixed economic systems presented in the lecture notes.

Economic System

The structured way a society allocates scarce resources and distributes goods and services.

Traditional Economy

An economic system based on customs, history, and time-honored beliefs where people produce mainly for their own consumption.

Market Economy

An economic system where investment, production, and distribution decisions are guided by price signals from supply and demand.

Free Market Economy

Another term for a market economy emphasizing minimal government intervention and freedom to engage in business.

Invisible Hand

Adam Smith’s concept that individuals’ pursuit of self-interest unintentionally benefits society through market forces.

Price Signal

Information conveyed to consumers and producers via the price of goods and services, influencing supply and demand decisions.

Supply and Demand

The relationship between the amount of a good available and the desire of buyers for it, determining price in a market.

Private Ownership

The right of individuals or firms to own resources and businesses rather than the state.

Self-Interest

The motivation of individuals to pursue their own benefit, considered a driving force in market economies.

Competition (Economic)

Rivalry among sellers or buyers aiming to achieve goals such as higher sales, lower prices, or better quality.

Laissez-faire

The principle of “leave it alone,” advocating no government intervention in economic activities.

Planned Economy (Command Economy)

An economic system in which a centralized government controls the means of production and sets output levels.

State Ownership

Government possession and control of resources and enterprises, characteristic of planned economies.

Central Planning

Government determination of production targets, resource allocation, and pricing in a command economy.

Karl Marx

Philosopher and economist who critiqued capitalism and inspired the concept of the command economy.

Common Interest

The collective welfare prioritized over individual gain in planned economies.

Absolute Equality

Goal of equal distribution of wealth and resources, often pursued in command economies.

Mixed Economy

An economic system blending elements of capitalism (private property, market forces) with socialism (government intervention for social aims).

Capitalism

An economic system characterized by private ownership of capital goods and market-determined prices.

Socialism

An economic approach advocating social ownership or regulation of the means of production for equitable distribution.

John Maynard Keynes

Economist who supported government intervention in markets, influencing mixed-economy policies.

Taxes

Compulsory payments to government used in mixed economies to fund public services and redistribute income.

Environmental Laws

Regulations aimed at protecting the environment, representing government intervention within a mixed economy.

Basic Economic Problems

Fundamental questions of what to produce, how to produce, and for whom to produce.

Producers

Individuals or firms that create goods or services for sale in an economy.

Consumers

Individuals or entities that purchase and use goods or services within the economy.

Inequality of Distribution

Uneven allocation of income and wealth, regarded as a loophole or drawback in pure market economies.