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25 Cards in this Set

  • Front
  • Back
A particular set of institutional arrangements and a coordinating mechanism
Economic system
Government owns most property resources and economic decision making occurs through a central economic plan.
Command system, Communism, Socialism
System characterized by the private ownership of resources and the use of markets and prices to coordinate and direct economic activity
Market system, Capitalism
Places where buyers and sellers come together to buy and sell goods, services, and resources
Markets
Coupled with the freedom to negotiate binding legal contracts, enables individuals and businesses to obtain, use, and dispose of property resources as they see fit.
Private property
Ensures that enrepeneurs and private businesses are free to obtain and use economic resources to produce their choices of goods and services and to sell them in their chose markets.
Freedom of enterprise
Enables owners to employ or dispose of their property and money as they see fit.
Freedom of choice
The motivating force of the various economic units as they express their free choices
Self-interest
Freedom of choice exercised in pursuit of monetary return; requires two or more buyers and two or more sellers acting independently
Competition
Using the resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services
Specialization
Human specialization
Division of labor
Makes trade easier; money
Medium of exchange
Swapping goods for goods
Barter
A convenient social invention to facilitate exchanges of goods and services.
Money
Cruicial in determining the types and quantities of goods produced.
Consumer sovereignty
Consumers spend their income on the goods they are most willing and able to buy
Dollar votes
The creation of new products and production methods completely destroys the markey positions of firms that are wedded to existing products and older ways of doing business.
Creative destruction
Illustrates the flows of goods and services, resources, and money for a simplified economy in which there is no government.
Circular flow diagram
One or more persons occupying a housing unit
Households
Commercial establishments that attempt to earn profits for their owners by offering goods and services for sale.
Businesses
Business owned and managed by a single person
Sole proprietorship
Two or more individuals agree to own and operate a business together
Partnership
An independent legal entity that can--on its own behalf--acquire resources, own assets, produce and sell products, incur debts, extend credit, sue and be sued, and otherwise engage in any legal business activity
Corporation
The place where the goods and services produced by businesses are bought and sold
Product market
Households sell resources to business
Resource market