Chapter 2 Flashcards
S1) Economic System
The structure of methods and principles that a society uses to produce and distribute goods and services.
S1) Factor Payment
The income people receive in return for supplying factors of production.
S1) Profit
The amount of money a business receives in excess of its expenses.
S1) Safety net
A set of government programs that protect people who face unfavorable economic conditions.
S1) Standard of Living
Level of economic Prosperity.
S1) Innovation
The process of bringing new methods, products, ideas into use.
S1) Traditional Economy
An economic system that relies on habit, custom, or ritual to decide the three key economic questions.
S2) Market
Any arrangement that allows buyers and sellers to exchange things.
S2) Specializations
The concentration of the productive efforts of individuals and businesses on a limited number of activities.
S2) Free Market Economy
An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets.
S2) Household
A person or group of people living in a single residence.
S2) Firm
An organizations that uses resources to produce a product or service, which it then sells.
S2) Factor Market
The arena of exchange in which firms purchase the factors of production from households.
S2) Product Market
The arena of exchange in which households purchase goods and services from firms.
S2) Self-Interest
An individual’s own personal gain.
S2) Incentive
The hope of reward or fear of penalty that encourages a person to behave in a certain way.
S2) Competition
The struggle among producers for the dollars of consumers.
S2) Invisible Hand
A term coined by Adam Smith to describe the self-regulating nature of the marketplace.
S2) Consumer Sovereignty
The power of consumers to decide what gets produced.
S3) Centrally Planned Economy
An economic system in which the government makes all decisions on the three key economic questions.
S3) Command Economy
Another name for a centrally planned economy.
S3) Socialism
A range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society.
S3) Communism
A political system in which the government owns and controls all resources and means of production and makes all economic decisions.
S3) Authoritarian
Describes a form of government that limited individual freedoms and requires strict obedience from its citizens.
