Ch-2 Flashcards
Safety net
Government programs that protect people experiencing unfavorable economic conditions
Factor payments
The income people receive for supplying factors of production
Standard of living
Level of economic prosperity
Traditional Economy
Economic system that relies on habit, custom, or ritual to decide questions of productions and consumption of goods and services
Market Economy
Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
Centrally Planned Economy
Economic system in which the central government makes all decisions on the production and consumption of goods and services
Market
An arrangement that allows buyers and sellers to exchange things
Specialization
The concentration of the productive efforts of individuals and firms on a limited number of activities
Household
A person or a group of people living in the same residence
Firm
An organization that uses resources to produce a product, which it then sells
Profit
The financial gain made in a transaction
Self-Interest
One’s own personal gain
Incentive
An expectation that encourages people to behave in a certain way
Consumer Sovereignty
The power of consumers to decide what gets produced
Socialism
A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society
