Questions and Answers
What is the definition of an economic system?
What are factor payments?
The income people receive for supplying factors of production, such as land, labor, or capital.
What is a safety net?
Government programs that protect people experiencing unfavorable economic conditions.
What does standard of living refer to?
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What is a traditional economy?
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What is a market economy?
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What is a centrally planned economy?
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What defines a command economy?
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What is a mixed economy?
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What is a market?
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What does specialization mean?
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What is a household?
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What defines a firm?
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What is a factor market?
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What does profit refer to?
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What is a product market?
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What does self-interest mean?
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What is an incentive?
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What does competition refer to in economics?
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What is the invisible hand?
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What does consumer sovereignty imply?
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What is socialism?
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What distinguishes communism?
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What does authoritarian mean?
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What is a collective?
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What does laissez faire mean?
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What is private property?
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What is free enterprise?
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What does continuum refer to?
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What does privatize mean?
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What is an advantage of free market?
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What do children in traditional economies grow up to do?
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What are the 3 key economic questions?
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Who is Adam Smith?
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What type of economy does Canada have?
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What type of economy does China have?
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What makes an economy more efficient?
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What does the government safety net not provide for?
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Study Notes
Economic Systems Overview
- An economic system is the method a society employs to produce and distribute goods and services.
- Key types of economic systems include traditional economies, market economies, centrally planned economies, command economies, and mixed economies.
Types of Economic Systems
- Traditional Economy: Relies on customs and rituals for production and consumption decisions.
- Market Economy: Based on voluntary exchange where decisions are driven by market interactions.
- Centrally Planned Economy: Central government makes all decisions regarding production and consumption.
- Command Economy: Similar to a centrally planned economy where a central authority controls the economy.
- Mixed Economy: Combines a market-based system with some government involvement.
Key Economic Concepts
- Factor Payments: Income received for supplying production factors like land, labor, and capital.
- Safety Net: Government programs designed to protect individuals during unfavorable economic conditions.
- Standard of Living: Reflects overall economic prosperity and quality of life.
- Specialization: Concentration of productive efforts on a limited set of activities to enhance efficiency.
Market Functions
- Market: An arrangement facilitating the exchange of goods and services between buyers and sellers.
- Factor Market: Firms purchase factors of production from households.
- Product Market: Households buy goods and services produced by firms.
Economic Incentives
- Self-Interest: Individuals’ motivations revolve around personal gains.
- Incentives: Expectations that influence behavior in specific ways.
- Competition: Producers struggle to attract consumer spending.
Economic Theories and Philosophies
- Invisible Hand: Concept describing how marketplace self-regulation leads to beneficial outcomes.
- Consumer Sovereignty: Consumers control production through their purchasing decisions.
- Laissez-Faire: Advocates minimal government intervention in economic activities.
- Socialism: Philosophy promoting wealth distribution through democratic means.
- Communism: Centrally planned system concentrating economic and political power in the government.
Ownership and Economic Roles
- Private Property: Property owned by individuals or enterprises, not the government.
- Free Enterprise: An economic system where capital goods are owned privately, emphasizing market freedom.
- Collective: Large farms leased to groups of peasant farmers, typically under state control.
Economic Enhancements and Transitions
- Privatize: Selling state-run enterprises to private individuals or entities.
- Understanding the continuum of economic systems helps in identifying market efficiencies and inefficiencies.
Key Historical Figures
- Adam Smith: Scottish philosopher who advocated for laissez-faire economics in "The Wealth of Nations," emphasizing limited government role in the economy.
Economic Characteristics in Specific Countries
- Canada: Exhibits a mixed economy leaning towards market dynamics.
- China: A mixed economy with significant central planning influences.
Important Economic Questions
- The three fundamental economic questions include what is produced, how it is produced, and whom it is consumed by.
Economic Efficiency
- Efficiency Improvement: Specialization is a crucial factor in enhancing economic efficiency, allowing for more effective use of resources.
Limitations of Support Systems
- Government safety nets do not extend to individuals with low income, highlighting gaps in economic protection.
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Description
Test your knowledge of economic systems with these flashcards covering key terms and concepts from Chapter 2 of your economics course. Learn definitions and examples of essential economic vocabulary. Perfect for students looking to reinforce their understanding in a quick and effective way.