ECO1010S Chapter 2

economic system

a method of organising an economy of which the market system and the command system are the two general types

market

any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service

command system

a method of organising an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activites

market system

a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicate and coordinate the decisions made by consumers, firms and resource suppliers

private property

the right of private persons and firms to obtain, own, control, employ, dispose of and bequeath land, capital and other property

freedom of enterprise

the freedom of firms to obtain economic resources, to use those resources to produce products of the firm’s own choosing and to sell their products in markets of their choice

freedom of choice

the freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line fo work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate

self-interest

that which each firm, property owner, worker and consumer believes is best for itself and seeks to obtain

‘invisible hand’

the tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interest of society

competition

the presence in a market of independent buyers and sellers competing with one another along with the freedom of buyers and sellers to enter and leave the market

emerging market

a combination of the characterisitcs of free markets and command systems and are in the process of creating opportunities to become a developed nation

specialisation

the use of the resources of an individual, a firm, a region or a nation to concentrate production on one or a small number of goods and services

division of labour

the separation of the work required to produce a product into a number of different tasks that are performed by different workers

medium of exchange

any item sellers generally accept and buyers generally yse to pay for a good sor service