Economics (Chapter 2, Section 2) - Key Terms Flashcards
Market
Any arrangement that allows buyers and sellers to exchange things
Specialization
The concentration of the productive efforts of individuals and businesses on a limited number of activities
Free Market Economy
An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
Household
A person or group of people living in a single residence
Firm
An organization that uses resources to produce a product or service, which it then sells
Factor Market
The arena of exchange in which firms purchase the factors of production from households
Product Market
The arena of exchange in which households purchase goods and services from firms
Self-Interest
An individual’s own personal gain
Incentive
The hope of reward or fear of penalty that encourages a person to behave in a certain way
Competition
The struggle among producers for the dollars of consumers
Invisible Hand
A term coined by Adam Smith to describe the self-regulating nature of the marketplace
Consumer Sovereignty
The power of consumers to decide what gets produced
