3.1- Economic systems

Economy is defined as ...

• the management of the house, like they meant in Ancient Greece.

• trading goods in order to make the maximun profit.

• the management of personal finances.

• every human activity that has the purpose of satisfying our unlimited needs.

• the analysis of economic events throughtout history and their impact on society.

Who is considered to be the founder of the capitalist theory?

What was the economic situation in Europe before the appearance of capitalism?

• The king was in charge of guaranteeing some basic services to the population.

• The country's economy was strongly controlled by the king and the nobility.

• The king allowed free trade inside his kingdom, without any restrictions.

• The nobility was in charge of planning the kingdom's economy, to benefit the population.

The capitalist economic system is based on ...

• the strick regulation of private activities and open competition.

• the total planification of the economy by the regional governments.

• the importance of the public sector, tax collection and the guarantee of basic services.

• the defense of private property, free market and open competition.

What is the purpose of the State in a capitalist economy?

• Do not intervene in the economy and let it regulate by his own

• To create a controlled economy, with a centralized planning

• To redistribite wealth and ensure economic equality.

• To control and regulate only the most important economic activities.

What determines the prices in a capitalist economy?

• The law of supply and demand.

• The central government’s planification.

• Agreements made between workers and employers.

• The law of diminishing returns.

What does "supply" mean?

• How much profit will the company obtain.

• The highest price at which a product can be sold

• To remove products that are not going to be sold.

• The the number of products available.

What does "demand" mean?

• The products that are expected to be sold.

• The lowest price for which something can be purchased.

• The number of people who want to buy the product.

• How much profit will the company obtain.

What does open competition mean?

• The government decides which companies can compete in the market.

• All businesses are free to operate in the market.

• Only the government can take part in the economy.

• All businesses have to agree on the prices of the products they sell.

What’s the consequence of taking part in an open market?

• Higher prices and an increasingly low quality of goods.

• Limited choices for consumers, due to lack of competition between companies.

• Only the most capable businesses grow, the rest will have to shut down.

• Every business in the market will obtain the maximum profit.