Microeconomics: Economic Systems and Philosophies

This set of vocabulary flashcards covers the fundamental concepts of microeconomics, including the three economic questions, types of economic systems, and the major economic philosophies of communism, socialism, and capitalism.

Economics

The study of choices.

Scarcity

The condition where limited workers, land, money, and resources force choices.

Tradeoffs

The result of choices where producing more of one thing can mean producing less of another.

Economic System

A framework created by a country to decide who gets what given that scarcity is always present.

Three Economic Questions

The three fundamental questions every society must answer: What goods and services are produced? How should these be produced? For Who should these be produced?

Market Economy

An economic system in which the questions of what, how, and for who goods will be produced are answered by people and businesses in the market.

Command Economy

Also known as a Centrally Planned economy, it is a system where all or many of the means of production and distribution are owned and controlled by the government.

Mixed Economy

The reality that no country has a pure Market or pure Command economy; all countries combine both private and public elements.

Communism

An economic and political philosophy seeking common ownership of productive resources rather than private ownership to reduce or eliminate economic classes.

Socialism

An economic philosophy that favors greater public or government involvement in the economy to promote economic equality and provide essential services.

Capitalism

An economic philosophy where most businesses and resources are privately owned, and markets make most economic decisions.

Incentives (Market)

Forces used in market economies to drive production and consumption; noted to be weaker in communist systems.

Economic Freedom Index

A scale used to measure countries based on their lean toward Command or Market economies, ranging from North Korea to Hong Kong.

Public Goods

Services or items provided by the government within an economic system, such as roads or national defense.

Safety Nets

Government-provided programs and regulations intended to protect individuals within an economic system.