Power and Limits of Markets (Exam 2) Flashcards Preview

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Flashcards in Power and Limits of Markets (Exam 2) Deck (24)
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1

Resource allocation

- Decisions of a society to determine how resources are shared among society's citizens

2

Resource ownership

- Decisions of a society determine property rights over resources in a society

3

Command system

- Rationing is done through a public, centralized planning, or communal method

4

Market System

- Private, decentralized interactions between buyers/sellers to allocate resources

5

Socialist system

Use public property as ownership

6

Capitalism

Use private property as ownership

7

Market capitalism

Economic system using private property ownership and private resource allocation decisions

8

Command socialism

Economic system that uses public property ownership + public resource allocation decisions

9

Market socialism

Economic system that uses public property ownership and private resource allocation decisions

10

Command capitalism

Economic system that uses private property ownership and public resource allocation

11

Efficiency of market capitalist

- Effective at generating efficient resource allocations because of reliance on comparative advantage
- Prices provide incentives
- Invisible hand

12

Invisible Hand

- Self-regulating mechanism of market systems that generate allocation of resources based on self-interest;, competition, and comparative advantage

13

Efficiency of command socialist

- Not well suited to generating economic efficiency
- Amount of information needed to determine and act upon comparative advantage would be far too extensive
- Less incentive for producers when prices are fixed

14

Equity in capitalist systems

- Distributes wealth based on willingness and ability to pay

15

Equity in command socialist

- More likely to achieve equitable resource allocation

16

Liberty in market system

- Rely on individual actors and individual decision making; thus generate moe personal liberty

17

Liberty in command system

- yeah no

18

security of market systems

- less security; systems in US also use social security taxes and other socialist mechanisms

19

Security of a command system

- Generates more economic security

20

Market failure

- Situations in which decision makers not faced with full costs and benefits of their action
- Generates inefficient allocation of resources
- Monopoly, public goods, externalities, and imperfect information

21

Monopoly

Markets with only one good or service

22

Public goods

Seller cannot exclude non buyers from using it

23

Externalities

Some costs and benefits of a tae are imposed on people outside trade (third-party)

24

Imperfect information

Full costs and benefits are unknown to all parties in trade