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Economics 1.1.7
Economics- Edexcel 1.1.7
| Term | Definition |
|---|---|
| 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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