The Market System and the Circular Flow

These flashcards cover key concepts related to the market system, including economic systems, fundamental questions, and principles governing market behavior.

Laissez-faire Capitalism

An economic system where the government primarily protects private property and enforces contracts without interfering with economic activities.

The Command System

An economic system where the government owns resources and makes production decisions; also known as socialism or communism.

Market System

An economic system characterized by decentralized decision-making with some government control, where private markets are the dominant force.

Private Property

Property rights that ensure mutually beneficial economic transactions, encouraging cooperation and economic growth.

Invisible Hand

A concept introduced by Adam Smith, suggesting that individuals’ self-interested actions can lead to positive societal outcomes.

Consumer Sovereignty

The principle that consumer preferences dictate the types and quantities of goods produced in a market economy.

Economic Freedom

The ability of individuals and businesses to make their own economic choices without excessive government intervention.

Self-interest

The consideration of one’s personal gain, which guides individuals' economic decisions in the market.

Competition

The rivalry among sellers to attract customers, which helps to regulate prices and drive innovation.

Circular Flow Model

A visual representation of how goods, services, resources, and money flow between households and businesses in an economy.