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15 Cards in this Set
- Front
- Back
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what is the basic economic problem/scarcity? |
infinite wants, finite resources - we must make choices about how we allocate resources in society among competing factors |
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what is opportunity cost? |
the benefits forgone of the next best alternative |
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what are positive statements? |
objective statements that can be tested with available evidence to support or refute them |
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what are normative statements? |
statements that cannot be supported or refuted by evidence as it features a value judgement |
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what is a free market economy? |
decisions regarding investment, production and distribution of scarce resources are made by supply and demand factors |
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what are the advantages of a free market economy? |
unlikely to have shortages or surpluses high quality and variety of goods and services high freedom of choice efficiency innovation |
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what are the disadvantages of a free market economy? |
demerit goods or goods with negative externalities will be overproduced merit goods or goods with positive externalities with be under produced there will be missing markets for public goods income distribution will be unequal monopolies can be formed |
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what is a planned economy? |
decisions regarding investment, production and distribution of scarce resources are planned and enforced by the government and is normally centralised |
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what are the advantages of a planned economy? |
the motive is to maximise welfare of citizens it ensures public goods are allocated income distribution is equal there won't be monopolies merit, demerit, positive externality and negative externality goods will all be provided at the socially optimum level |
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what are the disadvantages of a planned economy? |
response to demand is slow there can be shortages and surpluses efficiency is low the variety and quality of goods is typically low low freedom of choice |
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what is a mixed economy? |
an economic system that lies between a free market and planned economy, where the market is predominantly free but the government intervenes to alter the provision of certain goods and services |
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what are the cores elements of karl marx's economic doctrine? |
capitalism is just one stage in the development process of economic systems - one that will inevitably fall via revolution capitalism as a system is weak - as a result of its unplanned nature, one crisis will be caused after another until its collapse which will lead into communism competition would cause many firms to go bust, leading to a few firms going having monopoly power which enables exacerbated exploitation of workers |
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what are the core elements of adam smith's economic doctrine? |
founder of classical economics and a key advocate for market economies he produced the theory of the invisible hand, in which market forces, produced by self interested human beings, guide the allocation of resources in the way that is best for society competition ensures firms produce their goods at the lowest possibly cost and use resources efficiently also wrote about the role of specialisation and the division of labour in increasing productivity |
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what are the core elements of john maynard keynes' economic doctrine? |
government intervention represents the crux of his views, as it should be used to combat excessive boom and bust cycles in a nation's economy keynes, writing during the time of the great depression, was an advocate for government spending in order to bolster the private sector and increase demand deficit spending can stimulate activity, as a nation's income is formed by consumer spending and business investment, or else face a potentially never ending downward spiral |
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what are the core elements of friedrich hayek's economic doctrine? |
key supporter of the free market and deeply critical of socialism - he opposed collectivisation as it could lead easily to totalitarianism resource allocation should be left to individuals as they have the best knowledge of their personal situation - the price mechanism becomes a accumulated communication of all the knowledge within an economy hayek did support the concept of a safety net so the most basic level of securities could be provided to all citizens |
