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Flashcards in Chapter 2 Deck (33):
1

Economic system

Method by society to produce and distribute goods and services

2

Factor payment

Income people receive for supplying factors of production

3

Patriotism

Love of ones country

4

Safety net

Government programs protect people experiencing unfavorable economic conditions

5

Standard of living

Level of economic prosperity

6

Traditional economy

Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

7

Market economy

Economic system in which decisions on production and consumption of goods and services based on voluntary exchange in markets

8

Centrally planned economy

Economic system in which the central government makes all decisions on production and consumption of goods and services

9

Command economy

Economic system in which a central authority is in command of the economy

10

Mixed economy

Market-based economic system with limited government involvement

11

Market

Arrangement that allows buyers and sellers to exchange things

12

Specialization

Concentration of the productive efforts of individuals and firms on a limited number of activities

13

Household

A person or group of people living in the same residence

14

Firm

Organization uses resources to produce a product then sold

15

Factor market

Firms purchase the factors of production from household

16

Profit

The financial gain made in a transaction

17

Product market

Households purchase the goods and services that firms produce

18

Self-interest

Ones own personal gain

19

Incentive

Expectation that encourages people to behave in a certain way

20

Competition

Struggle among producers for the dollars of consumers

21

Invisible hand

Term economists use to describe the self-regulating nature of the marketplace

22

Consumer sovereignty

The power of consumers to decide what gets produced

23

Socialism

Social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout the society

24

Communism

Political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government

25

Authoritarian

Requiring strict obedience to an authority (dictator)

26

Collective

Large farm leased from the state to groups of peasant farmers

27

Heavy industry

Requires a large capital investment and that produces items used in other industries

28

Laissez faire

Doctrine states that government generally should not intervene in the marketplace

29

Private property

Owned by individuals or companies not by government or people as a whole

30

Free enterprise

Economic system characterized by private or corporate ownership of capital goods

31

Continuum

A range with no clear divisions

32

Transition

Period of change in which an economy moves away from a centrally planned economy toward a market-based system

33

Privatize

To sell state-run firms to individuals