Economic Systems

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Flashcards covering key concepts related to economic systems, focusing on capital, socialism, and communism.

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10 Terms

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Capital

A type of asset used to create goods or services, such as buildings, computers, and machinery.

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Durable Good

A good used for at least three years, such as a car, which is used repeatedly.

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Socialism

An economic system where capital assets are publicly owned and economic decisions are determined by a central planning board.

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The Incentive Problem

The difficulty in rewarding state planners for serving people well within a socialist system.

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The Knowledge Problem

The challenge faced by state planners in knowing how to best allocate resources in a socialist economy.

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Communism

An economic system where there is no private property and everything is communally owned.

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Means of Production

The facilities and resources for producing goods, which are ideally used to help others in a socialist economy.

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F.A. Hayek

Nobel-winning economist who argued against applying micro-cosmos rules to macro-cosmos systems.

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Public Ownership

Key aspect of socialism where the state owns the means of production.

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Economic Decision Making

In socialism, this is determined by a central planning board based on social priorities.