Ch 3 - Economic System

Allocative Efficiency

is a mechanism that allows buyers and sellers to exchange a good or service.

Capitalism

is an economic system where supply and demand determine prices.

Government intervention

impacts the invisible hand in the economy but they still have an important role to play in the economy.

Households

spend their wages and profit to purchase the goods and services that the firms supply.

Educational support

in the form of student loans, grants, etc after higher education is completed.

The Mixed Economy

is a blend of government commands and capitalism to address the fundamental economic questions which arise.

Command economy

one which the central government dictates what will or will not be produced.

Circular Flow Diagram

Diagram that shows how households and firms are related by the exchange of resources and products.

Allocative Efficiency

free markets are unaffected by third parties who are uninvolved.

Capitalism

the economic system where supply and demand define the prices.

Command economy

one which the central government dictates what will or will not be produced

Economy dominated by the government

they decide what gets produced, in what quantity, and who is entitled to it

Capitalism

is an economic system where supply and demand determine prices

Allocative Efficiency

is a mechanism that allows buyers and sellers to exchange a good or service

The Mixed Economy

is a blend of government commands and capitalism to address the fundamental economic questions which arise

Capitalism

the economic system where supply and demand define the prices

Allocative Efficiency

free markets are unaffected by third parties who are uninvolved

Circular Flow Diagram

Diagram that shows how households and firms are related by the exchange of resources and products