Chapter 2: Economic Systems

Question 0

economic system that centers on families, clans, or tribes

• decisions are based on customs and beliefs
• everyone has a set role
• good of the group always comes before individual desires

Answer 0

traditional economy

Question 1

the way in which a society uses its resources to satisfy its people’s unlimited wants

Answer 1

economic system

Question 2

economic system where the government makes economic decisions

• determines what to produce, how to produce, and who gets products
• wants of individuals rarely considered
• government owns means of production: resources and factories

Answer 2

command economy

Question 3

economic system driven by choices of both producers and consumers

Answer 3

market economy

Question 4

central government makes all decisions

- decides for whom to produce, in part, by setting wages only some people have money to buy available products

Answer 4

centrally planned economy

Question 5

government owns some of the factors of production

Answer 5

socialism

Question 6

no private property, little political freedom

Answer 6

communism

Question 7

requires total obedience to government

- example: communism

Answer 7

authoritarian system

Question 8

• lived during industrial revolution
• believed the European government was oppressive (workers didn’t have enough control)
• believed workers would rebel, leading to a classless society
• wrote “The Communist Manifesto”

Answer 8

Karl Marx

Question 9

right to own businesses and resources

- material objects, money, intellectual property, labor

Answer 9

private property rights

Question 10

place or situation where people but and sell goods or services

Answer 10

market

Question 11

government should not interfere in the economy

Answer 11

laissez-faire

Question 12

system having private ownership of factors of production

• says producers will create products consumers demand
• actual market economies all have some type of government involvement

Answer 12

capitalism

Question 13

belief that traders get more than they give up

Answer 13

voluntary exchange

Question 14

financial gain from business transaction

Answer 14

profit

Question 15

seller’s efforts to get business by offering the best deal

Answer 15

competition

Question 16

buyers choose products, control what is produced

• competition controls self-interest behavior
• sellers offer low price or high value to please consumers/make profit

Answer 16

consumer sovereignty

Question 17

people concentrate their efforts in the activities they do best

• encourages efficient use of resources
• leads to higher-quality, lower priced products

Answer 17

specialization

Question 18

illustrates how interactions occur in a market

- represents households and businesses/factor market and product market

Answer 18

circular flow model

Question 19

market where goods and services are bought and sold

- includes all purchases by individuals from businesses

Answer 19

product market

Question 20

market for the factors of production

Answer 20

factor market

Question 21

has elements of traditional, command, and market systems

- most common type of economic system

Answer 21

mixed economy

Question 22

to change from private to government ownership

Answer 22

nationalize

Question 23

to change from government to private ownership

Answer 23

privatize

Question 24

growth of economic actions across national boundaries - phone - computer - lower production costs - fast, safe & cheap

Answer 24

global economy