2.1 Flashcards
The structure of methods and principles that a society uses to produce and distribute goods and services
Economic system
The income people receive in return for supplying factors of production
Factor payments
The amount of money a business receives in excess of its expenses
Profit
A set of government programs that protect people who face unfavorable economic conditions
Safety net
Level of economic prosperity
Standard of living
The process of bringing new methods, products, or ideas into use
Innovation
An economic system that relies on habit, custom, or ritual to decide the three key economic questions
Traditional economy
Three economic questions
What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
Examples of factor payments
Landowners collect rent
Workers get paid wages
What are the economic goals
Economic efficiency Freedom Security Equity Growth
Is the concept that resources are always scarce. It is important that a society try to maximize what they can produce using the resources they have.
Economic efficiency
Most people don’t like uncertainty. Economics systems seek to reassure people that goods and services will be available when needed.
Economic security
Equity or fairness is another economic goal that is defined differently in different societies. Each society must decide on how to divide its economic pie.
Economic equity
A country’s economy must grow with its population. Jobs must be provided for the new people joining the workforce.
Economic growth
Four economies
Traditional economy
Free market economy
Centrally planned economy
Mixed economy
