MicroeconomicsLesson 6 of 6 in the course International Political Economy

Market Economies, Poverty, and Environmental Costs

5 flashcards · 4 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

This lesson introduces the market economy’s dual legacy: it has encouraged innovation and expanded access to goods, while also creating risks such as poverty and inequality. Understanding this tension helps explain why markets are praised for their opportunities and criticized for their consequences.

The development of the liberal market economy was associated with ideas that gained influence during the Enlightenment. These included laissez-faire economics, individual freedom, private property rights, and a limited role for government in economic affairs. Together, these ideas supported investment, trade, and the accumulation of capital.

All flashcards

Environmental externality
A consequence of production not fully reflected in the product’s market price.
Social costs
Production-related burdens on workers, communities, or the environment that producers may not pay.
Degrowth
An approach that prioritizes social and ecological well-being by reducing production and consumption.
Sustainable development
An approach that seeks to protect the environment through improved production, technology, innovation, and regulation.
Means of production
Resources and institutions, such as farms and factories, used to produce goods and services.

Quiz questions

  1. When more people seek a kind of job than there are available positions, what may happen to workers’ bargaining power and wages?Answer: Their bargaining power may weaken, putting downward pressure on wages.
  2. How can pandemics, armed conflict, and climate change threaten poverty-reduction gains?Answer: They can disrupt work, health, education, investment, and supply chains.
  3. Why is a product’s market price sometimes lower than its full social cost?Answer: The price may include producers’ private costs but omit harms borne by others.
  4. If environmental costs are added to a product’s price, what effect may follow?Answer: The higher price may reduce demand, sales, and production.

Based on Introduction to Political Science by Mark Carl Rom, Masaki Hidaka, Rachel Bzostek Walker (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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