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Chapter III


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market economy
an economic system based on private property and the market in wwhich, in principle, individuals decide how, what and for whom to produce
an economic system based on individuals' goodwill toward others, not on their own self-interest, and in which, in principle, society decides what, how, and for whom to produce
an economic system based on the market in which the ownership of the means of production resides with a small group of individuals called capitalists
Soviet-style socialist economies
economies that used administrative control or central planning to slve the coordination problems: whwat, how and for whom
an economic system in which traditions rule
an economic system in which government deternimes the what, how, and for whom decisions by doling out the rights to undertake certain economic activities
Industrial Revolution
a time when techonology and machines rapidly modernized industrial production and mass-produced goods replaced handmade goods
factor market
households supply labor and other factors of production to businesses and are paid by businesses for doing so
goods market
businesses produce goods and services and sell them to households and government
private producing units in our society
the ability to organize and get something done
consumer sovereignty
the consumer's wishes determine what's produced
whwat'sw left over from total revenues after all the appropriate costs have been subtracted
businesses with two or more owners: create possibilities for sharing burden, but unlimited liability for each partner
sole propetorship
businesses that have only own ownwer: easier to start, yet fewer options
businesses that are treated as a person, and are legally owned by their stockholeders, who are not liable for the actions of the corporate "person"
certificates of ownership in a company
equity capital (of a company)
proceeds from the sale of stock
limited liability
the stockholder's liability is limited to the amount the stockholder has invested in the company
buying and selling over the internet
groups of individuals living together and making joing decisions; the most powerful economic institution
global coproporations
corporations with substantial operations on both the production and sales sides in more than one country
an organization committed to getting countries to agree not to impose new tariffs or other trade restrictions except under certain limited conditions
roles of government
Effects of Globalization
1) inceases competition
2) allows firms to specialize
3) increases the gain to the industry leader by reducing costs, increasing size of market
Law of One Price
In today's globalized economies, incomes in low-wage countries will likely catch up with incomes in the US over coming decades

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