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| Version | User | Scope of changes |
|---|---|---|
| Aug 26 2008, 4:53 AM EDT (current) | welkerjason | 1612 words deleted |
| Aug 31 2007, 10:24 PM EDT | kl_0511 | 14 words added, 3 words deleted |
Changes
Key: Additions Deletions
Private Property:. In a market system, private Individuals and firms own most of the property resources - land and capital - not the government. It enables individuals and buisnesses to obtain, use, and dispose of property resources as they see fit. It can be extended to intellectual property such as copyrights, trademarks; encourages new innovative inventions under such long-term protection. Exchange also takes place to to private property, because it proves to the buyer that the seller is the legitimate owner. Private property encourages investment, innovation, property maintenance, and economic growth. Enable people to use their available resources to produce more goods and services, instead of using them to protect the land and capital they already have. Private property also encourages the owners to maintain or improve their property, so that they could increase its value. Property rights facilitate exchange.
Competition is the basis of regulation in the market system. The fundamental unit of competition comes from freedom of choice in monetary return. Competition requires: Two or more of both buyers and sellers in independent markets. According to personal self-interest, sellers and buyers have the liberty of entering and leaving markets. When there are multiple independent buyers and sellers in a market, none of them are able to set a price of a product because the others have the power to challenge. Thus, economic power is diffused because others can undercut that price. There are no restrictions to the flexibility of the market or industry. The unlimited freedom of entry and exit allow the market to adjust accordingly to consumers and technology. With competition, no one producer will be able to hold more power or try to set prices above the competitive market, or they will lose sales to other producers. Because there is competition, technological advances are made so that their product is either better or made faster and cheaper. Competitiveness is what makes the market efficient.
Markets and Prices:
Market (definition): an instution which brings buyers and sellers in contact. An economy based off of self-interest, the market economy, does not collapse because households and businesses are coordinated with each other through the market and prices Organization and coordinating mechanism Society decides what the economy should produce, how to be efficient, how production is to be distributed among various units The Market is the setting for many ideas in economics Supply and Demand are determined through the interaction between the suppliers and demanders in the marketplace Supply and demand in turn determines the price of a good or service The price is then further negotiated in the marketplace What goods are produced and for whom they are produced is decided in the marketplace The adaptation in the future occurs in the marketplace via changes in prices
Technology and Capital Goods:
- Opportunity and motivation for technological advance: Competition Freedom of choice Self-interest Personal reward- As the innovator directly receives increased monetary rewards for new products or production techniques, the market system encourages extensive use as well as rapid growth in complex capital goods, such as: Tools Machinery Large-scale factories Facilities for storage Communicatoin Transportation Marketing Entertainment/Advertisement- As the most direct techniques of production are often also the least efficient, advanced technology as well as capital goods are essential. - To avoid inefficiency, one must depend on capital goods. Example: It would be inefficient for a farmer to only use his bare hands for production. Instead, if he was to use capital equipment such as plows and tractors, he would have greater benefits. - The more efficient the production is, the more abundant the output would be.
Specialization: Specialization: Use of resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. Example: China specializes in manufactured goods because there is an abundant source of labor. most of the consumers produce almost no goods or services that they use themselves being self-sufficient causes inefficiency Division of labor: in a market system, efficiency is greatly emphasized. Therefore, it would serve the economy much more to have a division of labor (aka human specialization) than to have the whole population learn everything about every single job. An advantage of this is that it takes into account the people's differences in ability. Some people may be better at one thing than others, and that is how jobs are distributed - in accordance to your strenghts. The second advantage is that an employer may take the time to develop one specific skill needed for the job, instead of wasting his or her time learning. For example, a teacher would spend his time learning on what's the best way to teach, instead of focusing his time on engineering or cleaning. Lastly, division of labor saves a lot of time. By devoting time to a single task and being good at it, a person can avoid the loss of time. Geographical specialization: Specialization works on a regional and international basis. Geographical specialization is when a country is suited for a specific production of a certain good, which allows the country to sell the good and also trade with other countries. Disadvantages: workers can get very bored with what they do and not be motivated to do a good job. Also when there is a change of demand, the person that specializes in a particular area may lose his/hers job. And when one branch of specialist depends on another group of specialist, when one group fails to do it correctly, it can break down the whole system. Advantages:by specializing in a certain good or service, a country will be able to trade internationally thus would gain more goods or services than their domestic capabilities would usually produce.
Use of Money:
Money: medium of exchange. It also reflects the value of something. In most cases, products with high costs have high values. However, this is not always true. When two or more companies are in a competition, even if one of them has a better product, the company might lower the price purposely to appeal to consumers and win the competition. In order to serve as money, an item should go through a test: the item must be generally acceptable to sellers in exchange for their goods and services. Barter: exchange of goods for goods The problem with barter is that it requires a "coincidence of wants", so if person A wants person B's good but person B doesn't want person A's good, then no exchange can be made. Money facilitates trade when wants do not coincide in this case. This is where money comes in - money can accomplish trade even in a situation of noncoincidence of wants. With money, now person A can pay person B whatever the price that good is, and person B can use that money to get whatever he wants form another person. Specialization is one of the driving force of exchange.
Active, but Limited Government:
Every country in the world uses a mix of command and market economies. In the United States, capitalism is the main aspect of the economy, but the government still has a hand in it. For example, there are private colleges and state colleges. To ensure a high level of education, the government establishes these universities; the government also provides scholarships and loans to encourage the pursuit of education after high school. In contrast, countries that adopt a command economy style do not allow freedom in their economy. In countries such as North Korea, the government owns property rather than individuals, and it is the government that controls the amount of products. Another thing the government does is provide the public with goods businesses cannot make profit from such as parks and the natonal defense. Not only that, the active, but limited government takes active role in counteracting inadequate information given out in the society and rigorously regulates factors that will bring about benefits to the society as a whole such as that of reducing air pollution.The government will produce anything, that is not illegal such as drugs, to increase the competition of businesses. If they increase the competition, the economy will be more efficient and make better quality things at a lower price. When there is a "market failure" the government will step in. A market failure can be defined as a circumstance in which private markets do not bring about the allocation of resources that best satisfies society's wants.
- Freedom of Enterprise guarantees entrepreneurs the right to gain economics resources and to sell them in markets of their choice. Freedom of Choice allows owners to use and spend their money in any way they want. It also states that workers are entitled to pursue any type of work, as long as they are qualified. Consumers are allowed to spend their money in any way they want, as long as it is within their budget. These purchases are limited to what is legal. Illegal buys are not permitted, such as the buying and selling of illicit drugs and human organs
- Self-interest is basically the motivating force of economic units in the market system. People are interested in what they can get for themselves, not others Because people are interested in what they want, they place high value on something they want. When two people come together and mutually realize the other has something of higher value, they will be willing to trade Entrepreneurs try to maximize profit and minimize loss, and workers try to fulfill their satisfaction by taking jobs of higher wages, shorter working hours, and better working conditions. Also, the consumers try to buy the products at the lowest possible price with maximum utility. This is all self-interest that keeps the economy consistent.
Competition is the basis of regulation in the market system. The fundamental unit of competition comes from freedom of choice in monetary return. Competition requires: Two or more of both buyers and sellers in independent markets. According to personal self-interest, sellers and buyers have the liberty of entering and leaving markets. When there are multiple independent buyers and sellers in a market, none of them are able to set a price of a product because the others have the power to challenge. Thus, economic power is diffused because others can undercut that price. There are no restrictions to the flexibility of the market or industry. The unlimited freedom of entry and exit allow the market to adjust accordingly to consumers and technology. With competition, no one producer will be able to hold more power or try to set prices above the competitive market, or they will lose sales to other producers. Because there is competition, technological advances are made so that their product is either better or made faster and cheaper. Competitiveness is what makes the market efficient.
Markets and Prices:
Market (definition): an instution which brings buyers and sellers in contact. An economy based off of self-interest, the market economy, does not collapse because households and businesses are coordinated with each other through the market and prices Organization and coordinating mechanism Society decides what the economy should produce, how to be efficient, how production is to be distributed among various units The Market is the setting for many ideas in economics Supply and Demand are determined through the interaction between the suppliers and demanders in the marketplace Supply and demand in turn determines the price of a good or service The price is then further negotiated in the marketplace What goods are produced and for whom they are produced is decided in the marketplace The adaptation in the future occurs in the marketplace via changes in prices
Technology and Capital Goods:
- Opportunity and motivation for technological advance: Competition Freedom of choice Self-interest Personal reward- As the innovator directly receives increased monetary rewards for new products or production techniques, the market system encourages extensive use as well as rapid growth in complex capital goods, such as: Tools Machinery Large-scale factories Facilities for storage Communicatoin Transportation Marketing Entertainment/Advertisement- As the most direct techniques of production are often also the least efficient, advanced technology as well as capital goods are essential. - To avoid inefficiency, one must depend on capital goods. Example: It would be inefficient for a farmer to only use his bare hands for production. Instead, if he was to use capital equipment such as plows and tractors, he would have greater benefits. - The more efficient the production is, the more abundant the output would be.
Specialization: Specialization: Use of resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. Example: China specializes in manufactured goods because there is an abundant source of labor. most of the consumers produce almost no goods or services that they use themselves being self-sufficient causes inefficiency Division of labor: in a market system, efficiency is greatly emphasized. Therefore, it would serve the economy much more to have a division of labor (aka human specialization) than to have the whole population learn everything about every single job. An advantage of this is that it takes into account the people's differences in ability. Some people may be better at one thing than others, and that is how jobs are distributed - in accordance to your strenghts. The second advantage is that an employer may take the time to develop one specific skill needed for the job, instead of wasting his or her time learning. For example, a teacher would spend his time learning on what's the best way to teach, instead of focusing his time on engineering or cleaning. Lastly, division of labor saves a lot of time. By devoting time to a single task and being good at it, a person can avoid the loss of time. Geographical specialization: Specialization works on a regional and international basis. Geographical specialization is when a country is suited for a specific production of a certain good, which allows the country to sell the good and also trade with other countries. Disadvantages: workers can get very bored with what they do and not be motivated to do a good job. Also when there is a change of demand, the person that specializes in a particular area may lose his/hers job. And when one branch of specialist depends on another group of specialist, when one group fails to do it correctly, it can break down the whole system. Advantages:by specializing in a certain good or service, a country will be able to trade internationally thus would gain more goods or services than their domestic capabilities would usually produce.
Use of Money:
Money: medium of exchange. It also reflects the value of something. In most cases, products with high costs have high values. However, this is not always true. When two or more companies are in a competition, even if one of them has a better product, the company might lower the price purposely to appeal to consumers and win the competition. In order to serve as money, an item should go through a test: the item must be generally acceptable to sellers in exchange for their goods and services. Barter: exchange of goods for goods The problem with barter is that it requires a "coincidence of wants", so if person A wants person B's good but person B doesn't want person A's good, then no exchange can be made. Money facilitates trade when wants do not coincide in this case. This is where money comes in - money can accomplish trade even in a situation of noncoincidence of wants. With money, now person A can pay person B whatever the price that good is, and person B can use that money to get whatever he wants form another person. Specialization is one of the driving force of exchange.
Active, but Limited Government:
Every country in the world uses a mix of command and market economies. In the United States, capitalism is the main aspect of the economy, but the government still has a hand in it. For example, there are private colleges and state colleges. To ensure a high level of education, the government establishes these universities; the government also provides scholarships and loans to encourage the pursuit of education after high school. In contrast, countries that adopt a command economy style do not allow freedom in their economy. In countries such as North Korea, the government owns property rather than individuals, and it is the government that controls the amount of products. Another thing the government does is provide the public with goods businesses cannot make profit from such as parks and the natonal defense. Not only that, the active, but limited government takes active role in counteracting inadequate information given out in the society and rigorously regulates factors that will bring about benefits to the society as a whole such as that of reducing air pollution.The government will produce anything, that is not illegal such as drugs, to increase the competition of businesses. If they increase the competition, the economy will be more efficient and make better quality things at a lower price. When there is a "market failure" the government will step in. A market failure can be defined as a circumstance in which private markets do not bring about the allocation of resources that best satisfies society's wants.
