economic systems

having limited resources

scarcity

what is the point of having economic systems?

it is needed to determine how goods and services are going to be produced and distributed

what are the 3 economic questions?

1. what are we going to produce?

what is the 1st economic question

goods or services, guns or butter, industrial goods or agricultural goods

what is the 2nd economic question

traditionally, using technology, together or separate

what is the 3rd economic question

everyone, most, only a few

how is the 3rd economic question answered?

how societies choose to distribute income

making the most of resources

economic efficiency

freedom from gov intervention in the production and distribution of goods and services

economic freedom

protection of society's vulnerable during times of economic difficulty utilizing some form of social safety net

economic security

resources are devoted to research in order to spur development and generate constant economic growth leading to higher standards of living

economic innovation and growth

fair, impartial and balanced distribution of opportunity and wealth within a society

economic equity

when the government answers the 3 economic questions

command economy

individuals answer the 3 economic questions

market economy

in a market economy what is purused?

freedom, efficiency, growth, and innovation

what is not pursued in a market economy

security and equity

consumers have incentives to meet consumers desires, consumers essentially decide what gets produced via the purchases they make

consumer sovereignty

who founded the basic principles of a free market economy

Adam Smith

what did Adam Smith write

the wealth of nations

what allows a decentralized free market economy to function

self interest and competition

what does self interest mixed with competition create

the invisible hand

non government interference

laissez faire

what helped lead the pursuit of economic efficiency

specialization and labor

what is the original command economy idea

that a country's wealth should be spread around for the benefit of all

who came up with the idea for a command economy

karl marx

what was guaranteed in a command economy?

jobs and wages

what did workers not have in a command economy?

self interest and nothing to spend

who paid the opportunity costs of these decisions with shortages of food and light consumer products?

consumers

what two things does democratic socialism have

political freedom and economic freedom

what type of countries are northern european countries

mostly market based economies but retain socialist features such as free gov supported health care and higher education

what does performance rarely live up to?

ideals

what type of economic decisions are artificially low

bureaucratic

what did workers lack?

incentive

what type of rights were subordinates to the needs of the state?

individual

what wasn't utilized in socalisim

human capital

what creates the continuum

the balance between government control v. individual freedom

what is the order of the continuum

command economies on the far left and market on the far right

what are two examples of command economies

North Korea & Cuba

what are two examples of market economies?

US &UK

what type of economy does the US have

mixed market which is a free enterprise

what type government involvement is seen in the soviet union

social security and unemployment insurance

what happened to to many countries in the 20th century

they moved from command economies to market economies

transitioning from market to command

nationalization

two examples of nationalized countries

cuba and venezuela

what happens when a countries becomes a market economy

the population loses previously secured jobs

which type of economy has a higher GDP

market

how do economists refer to lower countries?

by using levels LDCs

what happens in LDCs

generally have lower standards of living and weak, ineffective and corrupt governments

what helps a country increase its human capital

education and training help