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Economics: Chapter 2: Economic Systems and Decision Making. Chapter 2: Economic Systems and Decision Making. An Economic System is a set of rules that govern WHAT goods and services to produce, HOW to produce them, and for WHOM they are produced. Chapter 2: Economic Systems and Decision Making.

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chapter 2 economic systems and decision making
Chapter 2: Economic Systems and Decision Making
  • An Economic System is a set of rules that govern WHAT goods and services to produce, HOW to produce them, and for WHOM they are produced.
chapter 2 economic systems and decision making6
Chapter 2: Economic Systems and Decision Making

Evaluating Economic Performance

  • The social and economic goals of U.S. society includes:
    • Economic Freedom
    • Economic Efficiency
    • Economic Equity
    • Economic Security
    • Full Employment
    • Price Stability
    • Economic Growth
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Chapter 2: Economic Systems and Decision Making
  • When goals conflict, society evaluates the costs and benefits of each in order to promote one goal over another; many election issues reflect these conflicts and choices.
  • People’s goals are likely to change in the future, as our economy evolves.
chapter 2 economic systems and decision making8
Chapter 2: Economic Systems and Decision Making

Capitalism and Economic Freedom

  • Capitalism is a competitive economic system in which private citizens own the factors of production.
chapter 2 economic systems and decision making9
Chapter 2: Economic Systems and Decision Making

5 Characteristics of Capitalism (Free Enterprise) System

  • 1. Economic Freedom
  • 2. Voluntary Exchange
  • 3. Private Property Rights
  • 4. Profit Motive
  • 5. Competition
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Chapter 2: Economic Systems and Decision Making
  • The entrepreneur is the individual who organizes land, capital, and labor for production in hopes of earning a profit. ** The profit motive is the driving force in capitalism.
  • In Capitalism, firms are in business to make a profit. To do this they must offer products consumers want at competitive prices.
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Chapter 2: Economic Systems and Decision Making
  • Consumer Sovereignty states that the consumer is the one who decides WHAT goods and services to produce.
  • The national government plays the role of protector, provider, and consumer, regulator, and promoter of economic goals.
  • The U.S. has a mixed economy or a modified private enterprise economy, in which its citizens carry on their economic affairs freely but are subject to some government intervention and regulation.