2: Economics Ch. 2: Economic Systems and Decision Making
What are the five characteristics of capitalism? (FVPPC)
Economic freedom: People choose their jobs and how they spend their money. Businesses choose what to sell and the price.Voluntary exchange Voluntary Exchange: Buyers and sellers exchange freely. Private Property Rights: People control their possessions. Profit motive: People are allowed to improve their lives by making money. Competition: Producers and sellers compete with one another to attract consumers while lowering costs. Consumers compete with each other to get the best products.
What is a command economy? Give examples of countries with a command economy.
A command economy is one where the government makes most economic decisions, such as what will be produced, how it will be produced, and for whom it is produced. North Korea and Cuba are examples.
What is a market economy?
A market economy is one where the common people act in their own interest to decide what is produced, how it is produced, and for whom it is produced. Buyers and sellers are free to exchange goods and services. Most large economies are market economies: USA, Japan, Great Britain, Germany, France, Mexico...
What are the advantages and disadvantages of a command economy?
Advantages: Can quickly and dramatically change if needed by shifting resources. Disadvantages: It does not meet the demands of consumers, it does not give people a reason to work hard, and it requires a large decision-making government agency.
What are the advantages and disadvantages of a market economy?
Advantages: It can adjust to change over time and it has a high degree of individual freedom because producers can make almost whatever they want and buyers can purchase almost anything they want. Also, there is very little amount of government involvement. There is a huge variety of goods and services available and a high degree of consumer satisfaction. Disadvantages: It does not provide for the basic needs of all people. It does not provide services that people need, such as justice, defense, or education. There can be a high degree of uncertainty.
What are the four economic roles of government? (PPRP)
Protector: The government has laws that prohibit false advertisement and dangerous products. Provider and consumer: The government provides services for citizens, such as defense or the post office. The government also a consumer of goods. Regulator: The government stops monopolies, and oversees interstate commerce and industries such as banking and nuclear power. Promoter of national goals: Helps the people of the nation obtain their goals through equality, security, employment, minimum wage, etc.