Chapter 2

• Economic System: The way in which a society decides what goods to produce,how to produce them, and for whom they will be produced.
• Free Enterprise: An economic ssysytem in which the individuals (not the government) own most if not all,the resources and control their use. The government plays only a small part in this economy.
• Socialism: An economic system in which the government controls and may own many of the resources.
• Economic Plan: A government plan specifying economic activities, such as what goods will be produced and what prices will be charged.
• Income Distribution: The way all income earned in a country is divided among differnet groups of income earners.
• Mixed Economy: An economy that is neither purely capitalist nor purely socialist , an econmoy has some elemts of both.Most countries in the world have mixed economy.
• Vision: A sense of how the world works.
• Labor Theory of Value: The belief that all value in produced goods is derived from labor.
• Surplus Value: The differnce between the total value of production and the substitute wages paid to workers.
• Globalization: A phenomenon by which economc agents in any given part of the world are affected by events elsewhere in the world;the growing integration of national economies of the world to the degree that they could merge and operate as a worldwide economy.
• Offshoring: The term used to describe work done for a company by persons other than the one in which the company is located.
• A countertrend ro globalization is that

  the internstional trade destroys jobs.
• Globalization is a process where 


  where national economies and business systems become interlinked with each other.
• A multi-global enterprise is 


  any business that has productive activities in 2 or more countires.
• Hospitals outsourcing radiology work to India is an example of

  globalization of production
• A key differnece between a market economy(ME) and a socialist economy (SE) is that

  in ME, prices are set by the state of supply and demand, SE prices are set by state.
• Protectionist countertrends,national differences in consumer behaviour and national differences in business 


  all place constarinst on the pace of globalization
• 3 Causes for Globalization:

  1. driven by better technology for travel and communication
  2. Countries make rules that make it easier for businesses to trade internationally
  3. People interacting with different cultures helps bring the world closer together.