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