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69 Cards in this Set
- Front
- Back
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3 characteristics of capitalism
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Private ownership of land
Competition Profits |
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3 pillars of free enterprise
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Private Property
Price System Competition |
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Guarantees the individuals right to own, use, and dispose of things of value
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Private Property
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Where resources are allocated as a result of the forces of supply and demand
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Price System
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Rivalry amongst buyers and sellers in purchase of resources and products
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Competition
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3 Characteristics of private property
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Natural Resources
Capital Income |
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The Father of Economics
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Adam Smith
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The Wealth of Nations
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Took a position against merchantilism
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Taking over overseas territory for profit
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merchantilism
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"Leave us alone"
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Laissez-Faire
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A person who believes in private property
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Physiocrat
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People naturally strive to do whatever benefits them most
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Self-Interest
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Gives consumers what they want when they want it
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"Invisible Hand"
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Money value of a good or service
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Price
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Percent of the total
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Market Share
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Measure of the amount of goods and services an individual considers essential to well-being
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Standard of Living
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First benefit of competition
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Gives us what we want when we want it
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Second benefit of competition
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To operate efficiently, we will need to conserve resources, increase output, and raise living standards
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Negative of competition (potential)
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Too much competition can lead to a monopoly
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Effort to conduct one's activities in such a way as to achieve the greatest return
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Economic self-interest
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Example of economic self-interest 1
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consumer will travel to get the best deal if it offsets the cost of travel and the cost of time
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Example of economic self-interest 2
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employeers will increase wages or working conditions to get the labor that is needed
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Economic self-interest does not always go along with human behavior 1
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People will not always take a higher paying job because they do not want to move to another region
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Economic self-interest does not always go along with human behavior 2
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Buisnesses contribute to charities
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Force that drives entreprenuers to risk their capital in business ventures
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Profit Motive
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Profits set aside in the form of savings provides companies with the capital they need to expand
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Profit Motive
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Encourage owners to use their resources more efficently
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Losses
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In the real world, government plays a significant role and there are limitations to private property
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Free Enterprise Theory vs. Reality
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The right of government to take private property at a fair price for public use
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Eminent Domain
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Safeguard the market system
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Role of government
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Interstate Commerce Act (1887)
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Set up to stop the abuse of railroads
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Northerns Security Case
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Enforced the ICA
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Sherman Anti-Trust Act (1890)
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Any combination in restrain of trade is illegal
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Clayton Anti-Trust Act (1914) 1
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Specified what acts would be considered in the restrain of trade
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Clayton Anti-Trust Act (1914) 2
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Set up the Federal Trade Commision
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Federal Trade Commision
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Allows government to step in and use power
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Coller Anti-Merger Act
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Declared mergers to be illegal, where they lessened competition of created monopoly
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Where one company buys another coming together
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Merger
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Government provides some public goods and services
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Mosquito Control
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The effects of economic activities that fall outside the market system
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Externality
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Programs to assist those in need (two catagories)
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Help People with their income
Eliminate causes of poverty |
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Programs to help special groups
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Inventors - Patents
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Programs to stablilize economy
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The Employment Act
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The Employment Act (1945)
Gave government the power to do three things |
1. Encourage full employment
2. Stabilize Prices 3. Economic Growth |
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Final Market price of all goods and services produced in a country
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Gross National Product
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People living in the same dwelling and functioning as an economic unit
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Household
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Resources of land, labor, capital, and ownership
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Productive Factors
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Using money to purchas real capital to be used in the production of goods and services
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Investment
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Formula - Consumer Spending to buisness spending equals gross national product
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CIG = GNP
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1930 (first, second, third)
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1. Consumer, 2. Investment, 3. Government
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Now (first, second, third)
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1. Consumer, 2. Government, 3. Investment
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Five Economic Goals
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1. Full Employment
2. Economic Growth 3. Price Stability 4. Economic Freedom 5. Economic Security |
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Jobs are available to everyone who is willing and able to work
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Full Employment
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Increase in output over a period of time, usually accomapnied by an increase of GNP
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Economic Growth
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Two ways to measure economic growth
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1. Constant dollars (inflation)
2. Current dollars |
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Absense of inflation or deflation, a period of time in which there is little change in what the dollar can buy
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Price Stability
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Price Stability - Inflation
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Period during which the purchasing power of the dollar is falling and prices are rising
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Decrease of prices where purchasing power of the dollar is rising
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Deflation
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People can choose how to spend their money and earn a living
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Economic Freedom
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Those who are unable to care for themselves will be provided with help
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Economic Security
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Government Bailouts
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1. Solvency
2. Insolvency |
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Company's financial help
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Solvency
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Cannot pay debts
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Insolvent
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1971: Penn Central
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$125 Mil
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1971: Lockheed
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$250 Mil
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1979: Crystler
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$1.5 bil
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1984: Cont. Illionois
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$4.5 bil
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Arguments: Defence
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1. Maintain Public confidence
2. Companies pay back government |
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Arguments: Against
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1. Not fair that government picks who to save
2. Tax Dollars |
