The Market And Circular Flow

Front 1

Elements of Economic Systems

Back 1

Ownership of Factors of Production

Methods used to Motivate, Coordinate, and Direct Economic Activity;

Front 2

The Market System

Back 2

Capitalism

Pure Capitalism - Laissez-Faire: limits government's role to protecting private property and establishing an environment appropriate to the operation of market system

Front 3

SIMILARITIES
-Specialization & Division of Labor;
-Importance of technological advancement & capital goods;
-Use money;
-Strive for progress + higher living standards;
-Have issues with environment;

Back 3

Free Market vs. Command System

Front 4

Five Fundamental Questions
1. What goods will be produced?
2. How will goods be produced?
3. Who will get the output?
4. How will the system accommodate change?
5. How will the system promote progress?

Back 4

1. Consumer sovereignty; Dollar votes;
2. Available technology; Prices of needed resources;
3. Consumers;
4. Guiding function of prices;
5. Technological advancement; Creative destruction; Capital accumulation.

Front 5

The Invisible Hand

Back 5

FIRMS and RESOURCE SUPPLIERS further own self interest = further the interests of SOCIETY

-Efficiency: promotes efficient use of resources;
-Freedom: emphasis on personal freedom;
-Incentives: encourages skill acquisition, hard work and innovation;

Front 6

Circular Flow

Businesses --> Resource Market --> Households --> Product Market --> Businesses

Back 6

Circular Flow

Front 7

GDP: Gross Domestic Product

Back 7

All goods and services produced within the borders of a country in a given year.

Front 8

GDY = Gross Domestic Income

Back 8

All the money income earned by resource providers in a country per given year.

Front 9

Positives of The Soviet Socialist System

Back 9

-Turned agricultural society into industrialized economy;
-Continued to grow after the soviet union;
-No unemployment of inflation;
-Provided universal education, healthcare, and pensions;
-Access to science and the arts;
-More equitable distribution of income;

Front 10

Problems of Soviet Socialist System

Back 10

-Lack of democracy;
-Purges of opponents;
-Establishment of political prisons;
-Forced collectivization of agriculture;
-Production motivations;

Front 11

Characteristics of Market System

Back 11

-Private Property;
-Freedom (Enterprise and Choice);
-Self Interest;
-Competition;
-Specialization (Geographic and Division of Labor);
-Use of Money;
-Active but limited government role;
-Technology and capital goods;

Front 12

Freedom of Enterprise

Back 12

Ensures entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and sell them on chosen markets.

Front 13

Freedom of Choice

Back 13

Enables owners to employ or dispose of their property and money as they see fit.

Front 14

Specialization

Back 14

Division of Labor
- Makes use of difference in ability;
-Fosters learning by doing;
-Saves time;

Geographic Specialization
-use of land and climate resources more effeciently

Front 15

Creative Destruction

Back 15

The creation of new productions and production methods completely destroys the market positions of firms that are wedded to existing products and production methods.