Market Economy
What is a fundamental characteristic of a market economy?
Private ownership of resources and minimal government intervention.
It describes how individuals pursuing their own self-interest can lead to economic prosperity for society as a whole.
The government or central planning authority.
What is a mixed economy?
An economic system that combines elements of both market and command economies.
What defines a traditional economy?
An economy that relies on customs, traditions, and historical precedents.
What is economic efficiency?
The optimal use of resources to produce the maximum output.
How are prices determined in a market economy?
By the interaction of supply and demand.
What are the fundamental economic questions?
What to produce, how to produce it, and for whom to produce.
How does government regulation impact a mixed economy?
It addresses issues such as equity, consumer protection, and market failures.
How do customs influence economic decisions?
They dictate production methods and distribution based on cultural practices.
What is economic equity?
Fair distribution of wealth and resources among all individuals.
What role does private property play in a market economy?
It incentivizes innovation and investment.
What is a key feature of a command economy?
Centralized government planning and control of resources.
What are the main economic goals of a mixed economy?
Economic efficiency, equity, security, and freedom.
What are the strengths and weaknesses of a traditional economy?
Strengths include stability and sustainability; weaknesses include resistance to change and lack of innovation.
What is economic security?
Assurance that basic needs will be met consistently.
What is the concept of opportunity cost?
The value of the next best alternative that is foregone when making a choice.
How does a command economy allocate resources?
Through government directives and planning.
How do consumers and producers interact in a mixed economy?
Through market transactions influenced by both government policies and consumer preferences.
How is work typically divided in a traditional economy?
Often along gender lines or through family roles.
How does innovation relate to economic growth?
Innovation drives productivity and creates new markets, leading to growth.
Explain Adam Smith's "invisible hand" concept.
It describes how individuals pursuing their own self-interest can lead to economic prosperity for society as a whole.
What are potential drawbacks of a command economy?
Lack of efficiency, innovation, and consumer choice.
What is the balance between economic freedom and equity?
Striving to allow individual choice while ensuring fair distribution of resources.
What role does tradition play in resource allocation?
It determines how resources are used based on long-standing practices.
Describe the importance of economic freedom.
It allows individuals to make choices regarding their economic activities, fostering entrepreneurship and prosperity.