Economics Chapter 2 Flashcards

Questions and Answers

What is an economic system?

Providing needs and wants for a society in an organized way (correct)

A system for organizing government functions

A method for conducting scientific research

None of the above

What defines a traditional economy?

An economic system that relies on habit, custom, or ritual to decide questions of production and consumption.

What characterizes a command economy?

A central authority makes major decisions about production and consumption.

What is a market economy?

An economic system where supply, demand, and price guide economic decisions. Signup and view all the answers

Define a market.

A meeting place of buyers and sellers. Signup and view all the answers

What is capitalism?

An economic system where private citizens own and use factors of production to obtain profits. Signup and view all the answers

What is a mixed economy?

An economic system that combines traditional, command, and market economies. Signup and view all the answers

Define socialism.

An economic and political system where the government owns and controls factors of production. Signup and view all the answers

What is communism?

An economic and political system where factors of production are controlled by the state and collectively owned. Signup and view all the answers

What does minimum wage refer to?

The lowest wage that workers can be paid. Signup and view all the answers

What is social security?

A federal program that benefits retired and disabled Americans, paid for by the working class. Signup and view all the answers

Define inflation.

A rise in the general price of goods. Signup and view all the answers

What is fixed income?

Income that doesn't go up even if prices do. Signup and view all the answers

What is free enterprise?

An economy in which competition is allowed to flourish with little government intervention. Signup and view all the answers

What does voluntary exchange mean?

Buyers and sellers freely engaging in market activities. Signup and view all the answers

Define private property rights.

Rights that allow individuals to own and control their possessions as they see fit. Signup and view all the answers

What is profit?

When a person or organization is better off at the end of a period than at the beginning in financial terms. Signup and view all the answers

What is the profit motive?

An incentive that makes people improve their well-being and financial status. Signup and view all the answers

Define competition in the market.

The struggle among sellers to attract buyers. Signup and view all the answers

What is consumer sovereignty?

The power of consumers to decide what gets produced. Signup and view all the answers

What is a mixed free enterprise economy?

An economy where people freely carry on economic affairs but must deal with some governmental regulations. Signup and view all the answers

Study Notes

Economic Systems Overview

An economic system organizes how a society meets its needs and wants efficiently.
Traditional economy relies on customs and habits to guide production and consumption decisions.
In a command economy, a central authority dictates major economic decisions, including what, how, and for whom to produce goods and services.
A market economy utilizes supply, demand, and pricing mechanisms to facilitate economic choices among individuals.

Key Economic Concepts

A market is where buyers and sellers interact to exchange goods and services.
Capitalism emphasizes private ownership of production factors, aiming for profit through individual enterprise.
A mixed economy blends elements of traditional, command, and market systems for a balanced approach.
Socialism entails government ownership and control over the means of production, impacting economic and political spheres.
Communism features state control over production resources, focusing on collective ownership and management.

Financial Terminology

Minimum wage establishes the lowest hourly pay workers can legally receive.
Social Security is a federal program providing benefits to retired and disabled individuals, funded by the workforce.
Inflation describes the overall rise in prices of goods and services, decreasing purchasing power.
A fixed income does not increase despite rising prices, which can affect financial stability.

Economic Principles

Free enterprise allows for minimal government interference, fostering competition among businesses.
Voluntary exchange occurs when buyers and sellers willingly participate in market transactions, promoting economic activity.
Private property rights empower individuals to own, control, and utilize possessions as they choose.
Profit is realized when financial gains exceed initial investment or costs.
The profit motive incentivizes individuals and organizations to enhance their financial well-being.
Competition drives sellers to innovate and attract consumers, benefiting the market.
Consumer sovereignty emphasizes the influence consumers have in determining production priorities.

Mixed Free Enterprise Economy

A mixed free enterprise economy combines individual economic freedom with certain government regulations to ensure societal needs are met while maintaining a competitive market environment.

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Description

Test your knowledge on economic systems and decision making with these flashcards from Chapter 2. Explore the definitions and characteristics of various economic systems including traditional and command economies. Perfect for students studying economics!