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Economics 1.1.7

Economics- Edexcel 1.1.7

TermDefinition
economic system a network of organisations used to resolve what, how much, how and for whom to produce as a way of addressing the basic economic problem
socialism a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole
communism a theory or system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs
communism vs. socialism under communism, most property and economic resources are owned and controlled by the state (rather than individual citizens); under socialism, all citizens share equally in economic resources as allocated by a democratically-elected government
quasi-public good near-public good
merit goods commodities that the public sector provides free or cheaply because the government wishes to encourage their consumption
supply and demand the relationship between buyers and sellers that is used as a measure for price determination in financial markets
market anywhere where buyers and sellers come together to transact
sub-markets broken down markets that tailor to different needs and wants of groups and consumers
disadvantage 1 of central planning bureaucratic costs of central planning: petty officialdom can lead to wasteful inefficiencies
disadvantage 2 of central planning problems in fixing prices of goods & services: government planners are unlikely to be as accurate as the market in determining suitable prices leading to numerous shortages and surpluses
disadvantage 3 of central planning absence of incentives for workers and businesses can damage productivity & lead to large levels of over-employment & lower living standards
disadvantage 4 of central planning low productivity & weak incentives can lead to rising losses for many state-owned enterprises: limited to incentive to innovate leads to a less dynamic economy
disadvantage 5 of central planning changing consumer needs & wants are not expressed as preferences in markets(slow to react)
disadvantage 6 of central planning state can suffer from information failures & corruption with political elites drawing most of the wealth
disadvantage 7 of central planning state-run economies are at higher risk of mal investment driven by political motivations, projects may be driven by vanity rather than objective cost-benefit analysis
capitalist economy an economic system organised along capitalist lines uses market-determined prices to guide our choices about the production and distribution of goods. One key role for the state is to maintain the rule of law and protect private property
command economy an economic system where most factor resources are allocated by the government, with few officially sanctioned private markets
consumer sovereignty exists when an economic system allows scarce resources to be allocated to producing goods & services that reflect the wishes of consumers. Sovereignty can be distorted by the effects of persuasive or misleading advertisement
economic planning government policies aimed at influencing trends in the economy
transition economy involved in a process of moving from a centrally planned economy to a mixed or free market economy
price mechanism the system where the forces of demand and supply determines the prices of commodities and the changes therein
Gini coefficient number between 0 and 100. 0 is where income is equally distributed. 100 is where one person owns everything
dynamism constant activity or forward movement
central planning decisions are made by a central authority rather than by market participants
monopoly a company dominates its sector with little or no competition
capitalism an economic system in which the main motive is to make a profit
Created by: jessharris
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