CHPT 2 Definitions

Question 1

ECONOMIC SYSTEM

Answer 1

The structure of methods and principles that a society uses to produce and distribute goods and services

Question 2

FACTOR PAYMENT

Answer 2

the income people receive in return for supplying factors of production

Question 3

PROFIT

Answer 3

the amount of money a business recieves in excesss of its expenses

Question 4

SAFTEY NET

Answer 4

a set of government programs that protects people from unfavorable economic conditions

Question 5

STANDARD OF LIVING

Answer 5

level of economic prosperity

Question 6

INNOVATION

Answer 6

the process of brining new methods, products, or ideas into use

Question 7

TRADITIONAL ECONOMY

Answer 7

an economic system that relies on habit, custom, or ritual to decide the three economic questions

Question 8

MARKET

Answer 8

arrangemnet that allows buyers and sellers to exchange things

Question 9

SPECILIZATION

Answer 9

the concentration of the productive efforts of individuals and businesses on a limited number of activities

Question 10

FREE MARKET ECONOMY

Answer 10

an economic system in which decisions on the three key economic quiestions are based on voluntary exchange in markets

Question 11

HOUSEHOLD

Answer 11

a person or group of people living in a single residence

Question 12

FIRM

Answer 12

an organization that uses resources to produce a product or service, which it then sells

Question 13

FACTOR MARKET

Answer 13

the arena of exchange in which firms purchase the factors of production of housholds

Question 14

PRODUCT MARKET

Answer 14

the arena of exchange in which households purchase goods and services from firms

Question 15

SELF-INTEREST

Answer 15

an individual’s own personal gain

Question 16

INCENTIVE

Answer 16

the hope of reward or fear of penalty that encourages a person to bahave in a certain way

Question 17

COMPETITION

Answer 17

the struggle of producers for the dollar of consumers

Question 18

INVISIBLE HAND

Answer 18

a term coined by Adam Smith to describe the self regulatng nature of the marketplace

Question 19

CONSUMER SOVEREINGTY

Answer 19

the power of consumers to decide what gets produced

Question 20

CENTRALLY PLANNED ECONOMY

Answer 20

an economic system in which the government makes all of the key decisions on the three key questions

Question 21

COMMAND ECONOMY

Answer 21

another name for the centrally planned economy

Question 22

SOCIALISM

Answer 22

a range of economic and political systems based on wealth should be distributed throughout a society

Question 23

COMMUNISM

Answer 23

a political system in which the government owns and controls all resources and means of production and makes all economic decisions

Question 24

AUTHORITARIAN

Answer 24

desciribes a form of govenrmemnt that limits individual freedoms and requires strict obedience from its citizens

Question 25

LIASSEZ-FAIRE

Answer 25

the doctrine that government generally should not interfere in the marketplace

Question 26

PRIVATE PROPERTY

Answer 26

property owned by individuals or companies, not by government or the people as a whole

Question 27

MIXED ECONOMY

Answer 27

a mixed-based economic system in which government is involved to some extent

Question 28

ECONOMIC TRANSITION

Answer 28

a period of change in which a nation moves from one economic system to another

Question 29

PRIVATIZATION

Answer 29

the process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the market

Question 30

FREE ENTERPRISE SYSTEM

Answer 30

an economic system in characterized by private or corporate ownership of capital goods