Chapter 2 Flashcards
(21 cards)
Command economy
An economic system in which the government makes all economic decisions
Market Economy
Individual choice and voluntary exchange direct economic decisions
Traditional economy
An economic system in which people produce and distribute goods according to customs handed down from generation
Economic System
The way a society uses resources to satisfy peoples wants
Socialism
An economic system in which the government owns some or all production factors
Communism
An economic system where the gov owns all factors of production and there is little to no freedom
Authoritarian system
Absolute obedience to those in power
Private Property Rights
The rights of individuals and groups to own businesses and resources
Market
Any place where people buy and sell goods and services
Laissez Faire
The principle that the government should not interfere in the marketplace
Voluntary Exchange
A trade in which both traders believe that what they are getting is worth more than what they are giving up
Profit
Financial gain that a seller makes from a business transaction
Competition
All the actions sellers acting independently do to get buyers to purchase their products
Consumer Sovereignty
Consumers have the ultimate control over what is produced because they are free to buy what they want and reject what they don’t want
Specialization
People concentrate their efforts in the activities that they do best
Circular flow model
A tool that economists use to understand how market economies operate
Product Market
The market where goods and services are bought and sold.
Factor Market
Market for factors of production: land, labor, capital, entrepreneurs
Mixed Economy
An economy that has the elements of a traditional command and market system
Nationalize
To change from private ownership to government or public ownership
Global Economy
All economic interactions that cross international boundaries
