economic systems
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Last updated 1:28 PM on 3/13/25
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49 Terms
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having limited resources
scarcity
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what is the point of having economic systems?
it is needed to determine how goods and services are going to be produced and distributed
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what are the 3 economic questions?
1. what are we going to produce?
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what is the 1st economic question
goods or services, guns or butter, industrial goods or agricultural goods
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what is the 2nd economic question
traditionally, using technology, together or separate
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what is the 3rd economic question
everyone, most, only a few
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how is the 3rd economic question answered?
how societies choose to distribute income
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making the most of resources
economic efficiency
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freedom from gov intervention in the production and distribution of goods and services
economic freedom
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protection of society's vulnerable during times of economic difficulty utilizing some form of social safety net
economic security
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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
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fair, impartial and balanced distribution of opportunity and wealth within a society
economic equity
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when the government answers the 3 economic questions
command economy
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individuals answer the 3 economic questions
market economy
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in a market economy what is purused?
freedom, efficiency, growth, and innovation
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what is not pursued in a market economy
security and equity
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consumers have incentives to meet consumers desires, consumers essentially decide what gets produced via the purchases they make
consumer sovereignty
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who founded the basic principles of a free market economy
Adam Smith
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what did Adam Smith write
the wealth of nations
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what allows a decentralized free market economy to function
self interest and competition
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what does self interest mixed with competition create
the invisible hand
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non government interference
laissez faire
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what helped lead the pursuit of economic efficiency
specialization and labor
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what is the original command economy idea
that a country's wealth should be spread around for the benefit of all
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who came up with the idea for a command economy
karl marx
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what was guaranteed in a command economy?
jobs and wages
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what did workers not have in a command economy?
self interest and nothing to spend
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who paid the opportunity costs of these decisions with shortages of food and light consumer products?
consumers
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what two things does democratic socialism have
political freedom and economic freedom
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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
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what does performance rarely live up to?
ideals
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what type of economic decisions are artificially low
bureaucratic
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what did workers lack?
incentive
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what type of rights were subordinates to the needs of the state?
individual
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what wasn't utilized in socalisim
human capital
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what creates the continuum
the balance between government control v. individual freedom
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what is the order of the continuum
command economies on the far left and market on the far right
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what are two examples of command economies
North Korea & Cuba
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what are two examples of market economies?
US &UK
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what type of economy does the US have
mixed market which is a free enterprise
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what type government involvement is seen in the soviet union
social security and unemployment insurance
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what happened to to many countries in the 20th century
they moved from command economies to market economies
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transitioning from market to command
nationalization
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two examples of nationalized countries
cuba and venezuela
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what happens when a countries becomes a market economy
the population loses previously secured jobs
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which type of economy has a higher GDP
market
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how do economists refer to lower countries?
by using levels LDCs
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what happens in LDCs
generally have lower standards of living and weak, ineffective and corrupt governments
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what helps a country increase its human capital
education and training help
Note 
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