American Heritage 4, 5

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Markets

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Divisions of the economy that specialize in certain goods or services.

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Market economy

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an economic model advanced by Adam smith in which the forces of individual self-interest regulate the economy. This self regulation eliminates the need for most government interventions

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Exchange

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trade between two parties

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Role of money

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money facilitates exchange by eliminating the necessity for a "coincidence of wants." functioning as a generally acceptable medium for exchange

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Coincidence of wants

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when two parties each possess something desired by the other promoting an exchange

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Specialization

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the economic practice of focusing resources on production of one or a few goods

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perfect competition

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when buyers and sellers have no influence on price and terms of exchange

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Collusion

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When sellers are conspiring to maintain a high price and avoid competing with one another

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Monopoly

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when one person or group captures enough market power to control or manipulate prices; the lack of competition in a market

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law of supply

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as the price of a particular good or service rises, suppliers will produce more of that good or service

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law of demand

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as the price of a particular good or service rises, individuals will buy less of that good or service

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role of prices

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in a market economy, prices determine the quantity of goods suppplied

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role of profits

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in a market economy, as profits increase, the number of suppliers and resources for making that good will increase

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equilibrium price

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the price at which the amount demanded is equal to the amount supplied

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shortage

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when the amount demanded is greter than the amount supplied

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surplus

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when the amount supplied is greater than the amount demanded

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The invisible hand

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adam smith's term for the natural self-regulation of a market economy driven by self-interest and efficiency

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Laissez-faire

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policy in which there is little or no interference with exchange, trade, or market prices by the government

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Efficiency

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a goal for economic systems to produce the most goods for the most people

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Equity

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a goal for economic systems to distribute goods and rewards fairly

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freedom

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a goal for economic systems to preserve the liberty of the people

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economic system

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a society's structure for making and distributing goods and services

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command system

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an economic system in which the allocation of resources is heavily controlled by government instead of free market forces

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Efficient economy

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an economy in which all benefits ar maximized to the point that one party cannot increase their benefits without decreasing the benefits of others

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Alexis de Tocquerville

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Frenchman who wrote "democracy in america" in which he explored the uniqueness of American character and its sources

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scarcity

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Economic condition where resources and supply cannot meet all demands, and therefore decisions must be made about which demands to meet

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opportunity cost

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the value of the best alternative not chosen

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specialization

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the economic practice of focusing resources on production of one or few goods

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Law of comparative advantage

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economic principle in which producers specialize in the production of goods where they have the lowest opportunity cost

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perfect competition

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when buyers and sellers have no influence on price and terms of exchange

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law of demand

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as the price of a particular good or service rises, individuals will buy less of that good or service

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Law of supply

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as the price of a particular good or service rises, suppliers will produce more of that good or service

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Equilibrium price

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the price at which the quantity demanded is equal to the quantity supplied

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Role of profits

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in a market economy, as profits increase, the number of suppliers and resources for making that good will increase

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Role of Prices

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In a market economy, prices determine the quantity of goods supplied

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Article: "The second coming of Adam Smith"

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Long passage about Adam Smith's economic contributions to the gov.
* all humans want to live better than they do
* gov should not repress self-interested people, self interest is a rich natural resource.
*communities can survive far more than others with central planning

* talks about roles of prices and labor/jobs

* a market system is essential, event he poor and politically impotent can prosper

helped increase the wealth of our nation with his ideas

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Article: "I, Pencil"

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* the invisible hand
* all the steps that go into making a pencil, millions that had to help with each particular ingredient
*the creation everything includes the sum of many parts
*Talks in "I..." a lot
*"Have faith that free men will respond to the invisible hand"

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Taxation without representation

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rallying cry of the colonists during the revolutionary period because of the taxes placed on them by a parliament in which they had no representation

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tea act

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legislation passed by the british gov designed to give the british east india company a monopoly on tea in the colonies, the act led to the infamous boston tea party

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boston tea party

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dec. 16, 1973, american colonists protested the british tax on tea by dumping 342 crates of british tea into boston harbor

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committees of correspondence

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groups organized for local colonial govs for the purpose of coordinating written communication with the other colonies.

They disseminated the colonial interpretation of british actions among the colonies and to foregin govs.
The network of committees would later provide the basis for formal political union among the colonies

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Patrick Henry

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best known for his famous "give me liberty, or give me death" speech in the Virginia house of Burgesses. Henry was an anti-federalist who pushed for a bill of rights to be added to the Constitution after its ratification

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Continental Congress

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a body of representatives from the british north american colonies who met to respond to England's intolerable acts.

They declared independence in July, 1776 and later drafted the articles of confederation

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declaration of independence

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1776 document expressing the desire and intention of the american colonies to break ties with Britain due to the injustices perpetrated by king george 3

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Thomas Paine

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an english intelectual scholar; revolutionary deist and idealist who spent much of his time in america and france.

a radical pamphleteer, paine helped foment the american revolution through his powerful writings, most notably, common sense.

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common sense

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a political tract written by thomas paine that helped convince colonists about the necessity to fight against britian and to become independent

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paul revere

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an american silversmith and a patriot in the merican revolution, revere is well known for his role as a messenger in the battles of Lexington and Concord.

He helped organize an intelligence and alarm system to keep watch on the british military

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George washington

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he led america's continental army to victory over britian in the revolutionary war and was the first president of the u.s. because of his central role in the founding of the u.s...he was also called the "father of his country"

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demigod

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half man half godlike. a trait sometimes wrongly attributed to the founders

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Wheelan's "the role of gov in the econ"

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Too much gov. is not good, but gov is good for many things like drivers licenses, etc. Not enough is also not good. The economy needs rules and regulations, but the gov. handles a little too much.

Lowering tax costs would ultimately raise money for the U.s. because people would want to work more, generating more income...more $ for the u.s.

* gov should NOT be the sole provider of a good or service unless there is a compelling reason to believe that the private sector will fail in that role.

*Gov already does public schools, mail, etc...but should they??

* gov could enhance the productive capacity and make us much better off, but too much is destructive.

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Paine's "common sense"

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So good! This talks about the monarchy of a king and how it corrupts a nation...why should the king be better than anyone else when they are paid to do a job and is a normal family that was just appointed to royalty? Why should they be better than their citizens? The passage explains that one honest man does more for his country than a king and that rulers go back years and have never succeeded in absolute freedom bc they always have someone governing them
*"The Lord shall rule over you!"
*Why should we have to rule like england??"

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Johnson's "taxation, No Tyranny"

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all americans have rights to choose their rulers. The americans are better englishmen...
*Americans have the right to select gov. and feel protected by it
* men are wrong for want of sense, but wrong by halves for want of spirit

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The role of Gov in a market economy

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1. prevent coercion and fraud
2. provide $
3. provide basic transportation and communication
4. define property rights
Enforce the exchange agreements

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Second treatise of gov v. declaration of independence

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second treatise directly influences the dec of indep.