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22 Cards in this Set

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  • Back
Adam Smith
Scottish philosopher and economist who wrote The Wealth of Nations. Considered the father of economics
Mercantilism
economic theory that emphasized the importance of stockpiling gold and silver to the economic power of a nation. encouraged exports and restricted imports
command system
economic system in which the allocation of resources is heavily controlled by government instead of free market forces
Navigation Acts
economic regulations passed by the British Parliament that said that all trade had to go through Britain so money would flow into motherland
capitalism
philosophy of a free market economy in which the government serves only to create an acceptable environment in which to make exchanges
The Wealth of Nations
criticized mercantilism and proposed a free market economy in which the "invisible hand" determined prices
market economy
forces of individual self-interest regulate the economy, eliminates need for most governmental interventions
exchange
trade between two parties
role of money
facilitates exchange, eliminates need for "coincidence of wants"
coincidence of wants
when two parties each possess something desired by the other, promoting an exchange
specialization
economic practice of focusing resources on production of one or a few goods
perfect competition
when buyers and sellers have no influence on price and terms of exchange
collusion
when sellers conspire to maintain a high price and avoid competing with one another
monopoly
when one person captures enough market power to control/manipulate prices; lack of competition
law of supply
as price rises, suppliers will produce more
law of demand
as price rises, individuals will buy less
role of prices
determine quantitiy of goods supplied
role of profits
as profits increase, number of suppliers and resources for making tht good will increase
equilibrium price
price at which the amount demanded equals the amount supplied
shortage
when the amount demanded is greater than the amount supplied
surplus
when the amount supplied is greater than the amount demanded
laissez-faire
policy in which there is little or no interference with exchange, trade, or market prices by the government