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24 Cards in this Set
- Front
- Back
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1723-1790 Scottish philosopher and economist who wrote "The Wealth of Nations." He is considered the father of modern economics.
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Adam Smith
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An economic theory that emphasized the importance of stockpiling gold and silver to the economic power of a nation; regulated the economy by encouraging exports and restricting imports.
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Mercantilism
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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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Command System
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Economic regulations passed by British Parliament to enforce trade regulations in the colonies: all trade had to go through British or colonial merchants and be shipped in British or colonial ships with the end goal to generate large exports from England, with few imports, so that gold and silver would flow into the motherland.
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Navigation Acts
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The philosophy of a free market economy in which the government serves only to create an acceptable environment in which to make exchanges.
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Capitalism
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Book written by Adam Smith that criticized mercantilism and proposed a free market economy in which the "invisible hand" determined prices.
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Wealth of Nations
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Divisions of the economy that specialize in certain goods or services.
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Markets
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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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Market Economy
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Trade between two parties.
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Exchange
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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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Role of Money
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When two parties each possess something desired by the other, promoting an exchange.
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Coincidence of Wants
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The economic practice of focusing resources on production of one or a few goods.
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Specialization
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When buyers and sellers have no influence on price and terms of exchange.
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Perfect Competition
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When sellers are conspiring to maintain a high price and avoid competing with one another.
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Collusion
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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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Monopoly
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As the price of a particular good or service rises, production of that good or service will rise.
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Law of Supply
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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 Demand
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In a market economy, prices determine the quantity of goods supplied.
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Role of Prices
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In a market economy, as the profits increase, the number of suppliers and resources for making that good will increase.
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Role of Profits
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The price at which the amount demanded is equal to the amount supplied.
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Equilibrium Price
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Demand is greater than supply.
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Shortage
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Supply is greater than demand.
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Surplus
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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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The Invisible Hand
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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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Laissez-faire
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