chap 2

Question 1

economic system

Answer 1

is the way a society uses resources to satisfy its people’s wants

Question 2

traditional economy

Answer 2

is an economic system in which people produce and distribute goods according to customs handed down from generation to generation.

Question 3

command economy

Answer 3

is an economic system in which the government makes all economic decisions.

Question 4

market economy

Answer 4

is an economic system in which individual choice and voluntary exchange direct economic decisions

Question 5

centrally planned economy

Answer 5

is a system in which central government officials make all economic decisions.

Question 6

socialism

Answer 6

is an economic system in which the government owns some or all of the factors of production.

Question 7

communism

Answer 7

is an economic system in which the government owns all the factors of production and there is little or no political freedom.

Question 8

Authoritarian

Answer 8

systems require absolute obedience to those in power.

Question 9

private property rights

Answer 9

are the rights of individuals and groups to own businesses and resources.

Question 10

market

Answer 10

is any place where people buy and sell goods and services

Question 11

laissez faire

Answer 11

is the principle that the government should not interfere in the marketplace.

Question 12

capitalism

Answer 12

is an economic system that is based on private ownership of the factors of production.

Question 13

voluntary exchange

Answer 13

is a trade in which both traders believe that what they are getting is worth more than what they are giving up.

Question 14

profit

Answer 14

is a financial gain that a seller makes from a business transaction

Question 15

competition

Answer 15

involves all the actions sellers, acting independently, do to get buyers to purchase their products

Question 16

consumer soverignty

Answer 16

is the idea that consumers have the ultimate control over what is produced because they are free to buy what they want and to reject what they don’t want.

Question 17

specialization

Answer 17

is a situation in which people concentrate their efforts in the activities that they do best.

Question 18

circular flow model

Answer 18

is a tool that economists use to understand how market economies operate.

Question 19

product market

Answer 19

is the market where goods and services are bought and sold.

Question 20

factor market

Answer 20

is the market for the factors of production—land, labor, capital, and entrepreneurship.